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Equality Under Threat by the Talented: Evidence from Worker-Managed Firms
Abstract
Does workplace democracy engender greater pay equality? Are high-ability individuals more likely to quit egalitarian organisational regimes? The paper revisits this long-standing issue by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The analysis is based on novel administrative data sources, which allow constructing a simple ordinal measure of the workers′ ability type. The paper's key findings are that (1) worker-managed firms have a more compressed compensation structure than conventional firms; and (2) high-ability members are more likely than other members to exit.This article is protected by copyright. All rights reserved.
... Ces coopératives ont pour but de fournir à chaque membre un emploi décent (Hyungsik & Terrasi, 2017). Les coopératives de travail sont jugées aussi efficientes que leurs homologues conventionnels (Burdín, 2016). En cas de crise, elles préservent mieux les niveaux d'emploi que les entreprises classiques (Pencavel, Pistaferri, & Schivardi, 2006). ...
... In the academic sphere, studies have been conducted to understand the emergence of cooperatives and to measure their economic performance in comparison with conventional, capitalist firms. In particular, worker-cooperatives have been subject to theoretical analyses (Ben-Ner, 1984;Bonin, Jones, & Putterman, 1993;Putterman, 1987;Ward, 1958) and empirical approaches (Burdín, 2016;Burdín & Dean, 2009;Pencavel, Pistaferri, & Schivardi, 2006). However, very little has been said on the extent to which it is beneficial to be a producer-member of an agricultural cooperative specifically. ...
... In keeping with the institutionalist view on cooperative governance (e. g. Abramitzky, 2011;Burdín, 2016;, pushing the CPA resource stock beyond the threshold could undermine the delicate incentive structure that harmonises heterogeneous economic member profiles (i.e. varying degrees of abilities, interests, or endowments). ...
Les théories classiques de la gouvernance prédisent l’échec des coopératives. Singulières par leur structure de propriété qui repose sur l’exercice collectif et démocratique des droits de propriété et de contrôle, les coopératives sont susceptibles de faire face à de multiples problèmes de gouvernance conduisant à un désavantage institutionnel. Paradoxalement, elles constituent une réalité statistique majeure dans le monde, dont la longévité et la résilience aux crises sont remarquables, en particulier dans le secteur agricole. Ce constat conduit à s’interroger sur l’existence de faiblesses dans la conceptualisation de la gouvernance et de la performance de la coopérative. A travers une méta-analyse, une revue de littérature systématique et une analyse de frontière de production, nos résultats suggèrent que certaines dimensions de la coopérative méritent d’être explorées plus profondément. L’articulation de la coopérative avec son environnement macro-institutionnel, y compris fédératif, façonne ses impacts sur ses membres. Appréhender l’équilibre délicat conduisant à des arrangements institutionnels durables dans l’organisation demande de reconsidérer la dimension démocratique de la coopérative en mobilisant des cadres théoriques alternatifs comme la gestion des Communs. Cet effort est nécessaire pour mieux comprendre la capacité des membres à s’organiser collectivement pour tirer parti de certaines contraintes institutionnelles et de groupe comme l’hétérogénéité du sociétariat.
... However, more participatory decision-making processes may also enhance productivity by allowing those with relevant knowledge to influence decisions. Third, some have argued that collectivist norms and participatory decision-making processes are likely to encourage wage compression, which may undercompensate the highest performers, leading them to leave the firm for better opportunities (Kremer 1997, Abramitzky 2008, Burdín 2016. Alternatively, democratic norms and decision-making processes may generate intrinsic rewards that high performers cannot find elsewhere, leading them to accept lower compensation (Preston 1989). ...
... Income inequality has become an increasingly important concern among academics and policymakers (Piketty and Saez 2003), and intrafirm pay inequality is a key determinant (Avent-Holt and Tomaskovic-Devey 2013), in some research accounting for as much as 20% of societal level differences (Cobb and Lin 2017). Scholars have emphasized a range of employment practices that exacerbate intrafirm pay dispersion (Cobb 2016), but worker ownership and governance rights have received little attention, although one of the most consistently recognized social benefits of democratic firms is that they display more condensed pay distributions (Pencavel 2001, Dow 2003, Clemente et al. 2012, Burdín 2016, Magne 2017. Later, we elaborate two pathways through which this organizational form alters the prevalence of inequality enhancing policies, leading to reductions in pay inequality. ...
Given consistent evidence of its social benefits but questions about its market viability, this paper examines the conditions under which workplace democracy can be understood as a “real utopia”; a viable form of organization that is both economically productive and socially welfare enhancing. Conceptualizing democratic firms as organizations with formally distributed authority and collectivist norms, we argue that democratic firms will operate more productively in knowledge intensive industries, compared with conventional firms in the same industries, because they give authority to those with relevant knowledge and encourage intrafirm information sharing. Next, focusing on intrafirm wage inequality as a key social welfare outcome, we argue that knowledge-intensive sectors are also settings where the benefits of workplace democracy are likely to be greater. Knowledge intensive industries tend to generate greater intrafirm inequality through the adoption of market-based employment policies and reliance on unique expertise, yet the formal structure and collectivist norms of democratic firms are likely to limit these mechanisms of inequality, generating inequality reductions. We test these hypotheses with longitudinal linked employer-employee data from French cooperatives and conventional firms, including firms that shift organizational structures over time. We find robust support for our hypothesis about economic performance and moderate support for our hypothesis about social performance.
Funding: This research has been generously supported by the Berg Center for Ethics, the Katz International Business Center, and the Bill Nobles Fellowship, as well as a public grant overseen by the French National Research Agency (ANR) as part of the “Investissements d’Avenir” program [Reference ANR-10-EQPX-17-Centre d’accès sécurisé aux données].
Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.1622 .
... More recently, Burdín (2016) and Dean (2019) investigate the economic performances of WMFs compared to CFs and state-owned firms; their research suggests that WMFs are viable alternative forms to organize production. The relation between cohesiveness and productivity is a key element of other empirical studies on WMFs. ...
... Basterretxea and Storey (2018) find evidence in support of this hypothesis from investigating case studies in Spain and the UK which suggest that WMFs have higher productivity, more equal wage structure and a lower turnover of employees. However, WMFs face a greater challenge in keeping their most productive employees as these workers can obtain a higher wage elsewhere and tend to leave WMFs (Burdín, 2016). ...
The paper deals with the recent resurgence of interest in
the concept of “socialism” from an economic perspective.
The most significant contemporary proposals for a
new model of socialism are surveyed across five major
thematic areas: socialism as a voluntary endeavor and
socialist ethics; socialism as a process of democratization;
socialism, efficiency and profit maximization; the
problem of planning and the new calculation debate;
and, socialism as a means versus socialism as an end. A
common framework to assess the new blueprints is constructed
to identify the likely directions of the research
on these themes in the near future.
... This possible variability may explain the contradictory findings of the very few studies comparing pay in worker co-operatives and conventional firms, with some studies observing higher pay in the co-operatives (Bartlett et al 1992, Burdín 2015 and others equal hourly wages in the two groups of firms (Magne 2014) or lower pay in the co-operatives (Pencavel et al 2006, Clemente et al 2012. Burdín (2015) on Uruguay, Magne (2014) on France, and to a certain extent Clemente et al (2012) on Spain also observe that worker co-operatives are more egalitarian than conventional firms. ...
... This possible variability may explain the contradictory findings of the very few studies comparing pay in worker co-operatives and conventional firms, with some studies observing higher pay in the co-operatives (Bartlett et al 1992, Burdín 2015 and others equal hourly wages in the two groups of firms (Magne 2014) or lower pay in the co-operatives (Pencavel et al 2006, Clemente et al 2012. Burdín (2015) on Uruguay, Magne (2014) on France, and to a certain extent Clemente et al (2012) on Spain also observe that worker co-operatives are more egalitarian than conventional firms. ...
In the economic literature, worker co-operatives are viewed as small, specialised and undercapitalised organisations that only thrive in unusual conditions and could not possibly constitute a serious alternative to conventional firms. This chapter challenges this conventional wisdom, drawing on a range of international economic studies comparing worker co-operatives and conventional firms. The evidence reviewed suggests that worker co-operatives match ‘mainstream’ firms for durability, and can be found in most industrial sectors. The chapter rejects the notion that worker co-operatives are systemically undercapitalised, and asserts that many are more productive than their mainstream equivalents, largely because of their capacity to motivate workers through their control of the enterprise. It suggests that worker co-operation is a viable alternative to private ownership for small and medium sized enterprises (SMEs), and that in some regions of Italy and Spain, the model is integrated into the economic mainstream.
... Worker cooperatives are organizations that equally distribute ownership among members, thereby removing the categorical distinction between worker and owner that characterizes capitalist firms Ellerman 1990). Empirical research suggests that inequalities in the distribution of power and resources are lower in cooperatives compared to conventional organizations (Bartlett et al. 1992;Burdín 2016;Dow 2003;Magne 2017;Pencavel 2002), but gender disparities persist (for a review, see Sobering et al. 2014). Research on plywood cooperatives in the U.S. Pacific Northwest, for example, finds that power is more equitably distributed because there are fewer managers (Greenberg 1984;Pencavel 2002). ...
... Research on plywood cooperatives in the U.S. Pacific Northwest, for example, finds that power is more equitably distributed because there are fewer managers (Greenberg 1984;Pencavel 2002). Studies of producer cooperatives in northern Italy and Uruguay find that they have lower wage inequality than conventional firms, although this may be due to the fact that individuals with higher earning potential exit the organizations (Bartlett et al. 1992;Burdín 2016). Despite their alternative organizational arrangements, worker cooperatives are not free from inequality. ...
Work organizations are commonly studied as sites that produce and reproduce inequality. But we know much less about how organizations promote equality. This article examines efforts to broaden access to power, opportunity, and resources in Hotel Bauen, a worker-recuperated business that was converted from a privately-owned company into a worker-run cooperative. Drawing on extensive ethnographic and archival research, I analyze efforts to redesign and redefine work through collective decision-making, job rotation, and pay equity. The article concludes by identifying three mechanisms of equality—inclusion, opportunity distribution, and symbolic leveling—to theorize the relational production of workplace equality and complement the near-exclusive focus on inequality and its effects.
... What is apparent is that the internal wage hierarchy (that is, the differential between the highest and lowest paid) in worker cooperatives is narrower than in mainstream organisations (Pérotin, 2016;Basterretxea and Storey, 2018). Similar findings emerge in a study by Bartlett et al (1992) involving a comparative investigation of firms in Italy and research by Burdín (2013) in Uruguay. ...
... £ Access to skilled labour. Pay tends to be lower in cooperatives and social enterprises compared to mainstream business organisations, and this limits their ability to attract skilled labour (Burdín, 2013;Latinne, 2014). However, while cooperatives may find it more difficult to attract staff, they are more effective when it comes to staff retention due to the fact that workers invest their own capital in the organisation (Millstone, 2015;Basterretxea and Storey, 2018). ...
The findings of this study show that cooperatives and social enterprises can and do deliver positive employment outcomes, as well as good jobs. They appear to do this by incorporating the human resource practices that are being championed by many mainstream businesses. In this, cooperatives and social enterprises contribute significantly to the EU Europe 2020 policy aspirations for sustainable and inclusive growth as well as fair work identified within the European Pillar of Social Rights.
The evidence points to the need to support an promote cooperatives and social enterprises at the EU national and regional levels as a vehicle for socioeconomic development.
... 7 3-The CF where employees worked previously and the new WMF both operate in the same industry. 6 This operative delimitation is the same used in other works on Uruguayan WMFs (Alves et al., 2016;Burdín, 2014Burdín, , 2016Dean, 2009, 2012;Dean, 2019). 7 Originally, the second identification criterion for RFs was stricter: to be an RF, the previously-existing CF must have closed before the WMF was created. ...
The economic crisis experienced by many developed countries over the past decade saw the emergence of the phenomenon of so-called recovered firms (RFs), or employee buyouts of failed capitalist firms (CFs). While it is obvious that one of the objectives sought by these workers is to keep their jobs, the subsequent performance of these firms is unclear. Are RFs more likely to fail than other worker managed firms (WMFs) or than CFs? Do RF workers get higher incomes than their peers in other WMFs or in CFs? This analysis is based on a linked employer–employee panel data set from Uruguayan social security administrative records. The main findings are that RFs survive longer than other WMFs or than CFs. However, RF workers receive incomes lower than those of their peers at other WMFs or at CFs. This income differential is explained partly by a brain drain process and specific human capital losses.
... Second, information asymmetries or "prisoner's dilemma" dynamics may block unilateral voluntary adoption of worker participation even if the institution is socially beneficial (Levine and Tyson 1990). For instance, firms that voluntarily adopt shared governance may thereby signal to the stock market that workers have gained the upper hand in their internal labor relations, resulting in a stock price decline (Hayden and Bodie 2021); alternatively, mild wage compression induced by codetermination may cause talented workers to leave codetermined firms for noncodetermined ones (Burdín 2016). ...
... As managers' preferences mediate important strategic decisions within firms, our results may have important implications for understanding the behaviour of cooperatives in competitive markets. The documented differences between co-op and conventional managers in terms of risk preferences and altruism seem consistent with well-documented facts about the actual behaviour of cooperative firms, such as their concentration in less risky and less capital-intensive industries (Podivinsky and Stewart, 2007) and their egalitarian compensation policies (Abramitzky, 2011;Burdín, 2016). Further research is needed to understand how co-op managers' preferences interact with those of worker-members and correlate with organizational design and performance. ...
The relationship between firms’ owners and managers is a quintessential example of costly principal–agent interaction. Optimal design of monetary incentives and supervision mechanisms are the two traditional ways of reducing agency costs in this relationship. In this paper, we show evidence which is consistent with a third mechanism: firms have managers whose economic preferences are aligned with owners' interests. We uncover differences in economic preferences between managers employed in firms controlled by two distinct classes of ‘patrons’: employee-owned firms (worker cooperatives) and conventional investor-owned firms. In a high-stakes lab-in-the-field experiment, we find that co-op managers are less risk-loving and more altruistic than their conventional counterparts. We do not observe differences between the two groups in terms of time preferences, reciprocity, and trust. Our findings are consistent with existing evidence on worker cooperatives, such as their tendency to self-select into less risky industries and their compressed compensation structures.
... In keeping with the institutionalist view on cooperative governance (e.g. Abramitzky 2011;Burdín 2016;Hansmann 2000), pushing the CPA resource stock beyond the threshold could undermine the delicate incentive structure that harmonises heterogeneous economic member profiles (i.e. varying degrees of abilities, interests, or endowments). ...
This paper introduces a refined approach to conceptualising the commons in order to shed new light on cooperative practices. Specifically, it proposes the novel concept of Common-Property Assets (CPAs). CPAs are exclusively human-made resources owned under common-property ownership regimes. Our CPA model combines quantity (the flow of resource units available to members) and quality (the impact produced on the community by the members’ appropriation of the resource flow). While these two dimensions are largely pre-existing in the conventional case of natural common-pool resources, they directly depend on members’ collective action in CPAs. We apply this theoretical framework to farm machinery sharing agreements—a widespread grassroots cooperative phenomenon in agriculture—using a systematic literature review to generalise the findings from a sample of 54 studies published from 1950 to 2018. Our findings show that in successful CPAs, members endorse and do not deviate from a quantity-quality equilibrium that is collectively agreed upon. Despite the existence of thresholds for both quantity and quality due to (axiological) membership heterogeneity, qualitative changes in respect of the common good are possible in CPAs that promote democratic practices. Our study has potentially strong implications for developing ethics in cooperatives and the sustainable development of communities worldwide.
... Evidence of higher wages in co-operatives is found in a few studies and favoured by production technologies characterised by decreasing returns to scale (cf.Burdín and Dean 2009;Burdín 2016; Dean 2018 on Uruguay).5 The ratio of managerial pay to unskilled manual pay is almost 75% higher in private firms than in cooperatives (ibid. ...
Worker co-operatives have been shown as characterised by higher wage volatility while providing higher employment stability compared with investor-owned firms (IOFs). These stylised facts show co-operatives’ stronger tendency to preserve employment more than maximising members’ incomes or profits. Most empirical tests in different national contexts also provide evidence of lower wages in worker co-operatives than in IOFs. Such evidence is unexplained to date. To fill this explanatory gap, we resort to the Shapiro and Stiglitz (Am Econ Rev 74(3):433–444, 1984) model of unemployment as a worker discipline device. Given lower agency costs, more efficient monitoring and the absence of wage premiums compensating for the expected costs of contractual failures, we show that equilibrium wages in co-operatives can be lower than in IOFs, while employment, ceteris paribus, is always higher. We draw the following conclusions: (1) Equilibrium unemployment can be at least partly interpreted as a negative external effect of labour contract failures and bilateral opportunism. (2) Shapiro and Stiglitz’s (1984) result is a special case of a broader class of equilibria characterised by contractual imperfections in the agency relation. (3) Various ownership forms can have different impacts on equilibrium unemployment and wages.
... donde: S it es el número de salidas (el número de empresas que cierra en el período) y las variables explicativas son las mismas que las utilizadas en el modelo de entradas salvo por E it que es 19-Un análisis complementario al utilizado en el presente trabajo se puede encontrar en Burdín (2013;. En el primero de dichos trabajos se analizan los determinantes de la sobrevivencia de CT y EC, mientras que en el segundo se estudia el efecto de la desigualdad salarial en los procesos de surgimiento de CT. ...
El origen de la legislación cooperativa en Uruguay es producto de una transacción entre
diferentes posturas políticas e ideológicas que concebían de distinta manera el papel del Estado, el mercado y las cooperativas. El debate sobre las cooperativas forma parte de la disputa entre las dos grandes familias ideológicas que se enfrentaron en Uruguay a comienzos del siglo XX: republicanos solidaristas y liberales individualistas. Para comprender este origen y explicar su evolución, nos planteamos como objetivo general la identificación y caracterización de la red conceptual compuesta por la tríada de conceptos: cooperativa, mercado y Estado que emerge del debate parlamentario generado en ocasión de la aprobación de las primeras leyes cooperativas en el país.
... These same contributions explain low wages by the need to stabilise employment. Finally, in Burdin's (2016) contribution on the whole economy in Uruguay, lower wages in cooperatives are also explained by the stronger outflow of educated workers from worker cooperatives than from investor owned enterprises. ...
... Pencavel et al. (2006), also using Italian data, calculate that, all other things being equal, wages are lower in worker-owned cooperatives than in conventional firms. The wage equations estimated by Burdin (2013) using Uruguayan data show that wages are higher than in conventional firms but this result does not apply at the top of the wage distribution, where the wage premium is negative in worker cooperatives. Accordingly, these results point in the same direction as those produced by Barlett et al. (1992). ...
The aim of this article is to investigate the wage differentials between conventional firms and non-worker cooperatives, which has seldom been done in the literature to date. Using French administrative data, the determinants of these wage differentials are analysed. This investigation is carried out across all industries and is then repeated for the banking industry. Taking all industries into account, conventional firms offer lower wages than cooperatives. Most of this pay gap is explained by differences in the characteristics of the employees, jobs and companies. If the focus is narrowed to firms in the banking industry only, it becomes clear that conventional firms pay higher wages than cooperatives but that this gap is explained solely by differences in characteristics. However, their impact is weakened somewhat by differences in the value attributed to these characteristics, which work in favour of employees in cooperatives.
... This is facilitated by the incentive that more experienced members have to pass on information and provide on-the-job training, as profits are shared, while the perspective of long-term employment makes it worthwhile for individual employees to invest in human capital (Askildsen and Ireland 1993). Finally, the more egalitarian pay distribution found in workers' cooperatives is characterised by higher pay in the lower deciles (and lower pay in the highest) than in conventional firms (Clemente et al 2012, Burdín 2015, Magne 2014). This pattern is again likely to benefit younger members, who tend to occupy more junior positions. ...
... Of course, the degree of inequality ultimately chosen by private or public policy-makers also has implications for efficiency. For example, Burdín (2015) shows how the degree of wage inequality chosen by firms has important implications for their ability to retain high-ability workers. ...
... Relative pay levels in the two sectors are therefore likely to depend on the stage in the business cycle. This possible variability may explain the contradictory findings of the very few studies comparing pay in worker cooperatives and conventional firms, with some studies observing higher pay in the cooperatives (Bartlett et al 1992, Burdín 2015 and others equal hourly wages in the two groups of firms (Magne 2014) (2012) on Spain also observe that worker cooperatives are more egalitarian than conventional firms. ...
... Nous observons un fort degré de réalisme concernant la faiblesse des marges de manoeuvre sur les salaires dans des entreprises très exposées à la concurrence. Cette (Burdin, 2013). Une note de l'INSEE (Bisault, 2012) permet de constater que le secteur de l'ESS en général, et les Scop en particulier, présentent une échelle des salaires plus resserrée que dans le secteur privé. ...
In this article, we study the organizational structure of cooperatives (Jensen and Meckling, 1992) and particularly how pay incentives may encourage employees to adopt their firm’s strategy. Based on the findings of a field study, we can assert that salaries play a minor role in cooperatives, even though these structures still perform well and efficiently in a period of economic crisis. The organizational structure theory allows to conclude that pay incentives are not effective in cooperatives whereas delegation is a strong pillar. As for control, it remains diversely used and even rarely claimed by managers. Complementary approaches are used to identify new ways of understanding the cooperatives’ institutional complexity.
While there are normally positive expectations concerning job quality in cooperatives, many studies have described a more complex picture. The extant literature has, however, found it difficult to deal with evidence of poor working conditions in these organisations. Some contributions downplay the relevance of this issue, arguing that poor extrinsic aspects of job quality are compensated by intrinsic rewards, as confirmed by higher levels of job satisfaction. Others focus on external market pressure and interpret bad labour conditions as a form of degeneration of originally good employment practices. Through a qualitative analysis of job quality in cooperatives in three sectors of the Italian economy (social services, hotel cleaning and meat processing), we advance a different argument: we contend that employment practices associated with poor job quality are not the result of difficult market conditions but are rather the key explanation for the quantitative expansion of this form of economic organisation, which has moved from being an instrument for promoting good employment to a way of ensuring lower labour costs and higher flexibility within outsourcing relationships.
As enterprises that are owned and governed by workers themselves for their mutual benefit, worker cooperatives are currently re-emerging as a promising antidote against precarity and economic dependence in the gig economy. Considering the social and geographic fragmentation of gig workers, it remains unclear whether cooperatives can count on the member commitment necessary to survive. This study investigates whether preference deviation and social disembeddedness stifle the commitment of gig workers to such cooperatives. A cross-sectional survey was used to gather data from members of four interconnected cooperatives in Italy that consist of gig workers in the cultural, ICT and education sectors ( n = 425). The results show that members with more deviating preferences and less social embeddedness among fellow members have a lower commitment towards their cooperative. These findings demonstrate the conditions for gig workers’ commitment to cooperatives, being a key factor in cooperative longevity.
In producer co‐operatives (PCs), decision‐making and ownership lie with the firm's workforce. Typically, the PC sector is of marginal economic significance – interest in PCs stems primarily from features such as democratic governance. Comparing PCs with capitalist firms (CFs) we find that PCs are larger, are not confined to particular industries, have a pronounced productivity edge, and have survival rates at least as good. Entry is a key problem for PCs, and formations respond pro‐cyclically to unemployment while there are important network effects. No persuasive evidence exists for the alleged tendency of PCs to degenerate or for underinvestment. While CFs adjust employment in response to product price changes and demand shocks, in response to similar perturbations PCs adjust pay more than employment. Within‐firm inequality is lower in PCs, though this may lead to loss of talent. Evidence on worker outcomes such as job satisfaction sometimes suggests poorer outcomes for workers in PCs. Significantly larger PC sectors are unlikely to result from policies promoting “recovered” companies. To better understand many issues, improved and comparative data sets – for both sets of firms and individual enterprises, and with a broader range of crucial variables – are needed. Two underdeveloped theoretical issues are the role of co‐operative networks and the relationship between PCs and social capital.
In this paper, we measure whether contractual profit sharing (PS) influences firm innovation and, if yes, how. We disentangle PS effects for different and possibly conflicting interest groups within the firm. We exploit the fact that PS schemes rarely cover the workers all together, but more often than not are used at some organizational layer in the corporate hierarchy and not at others. Based on the analysis of a representative sample of Italian firms, the key contribution of the study is to show that the structure of PS plans matters significantly for innovation. While PS for managers is associated with little or no improvement in innovation activity, PS for non-managers spurs the probability of observing innovation by about 5 to 12 percentage points. The difference between managerial and non-managerial PS effects appears wider for process, arguably incremental innovation. We also document how PS effects, particularly for non-managers, change depending on other firm level variables, such as size, unionization, exposure on international markets, the span of managerial control and some characteristics of the workforce. Policy implications are discussed.
Purpose
The purpose of this paper is to give an updated overview of the research on employee ownership. What does the scientific literature reveal about advantages and disadvantages? What can be learned from different models used in Italy, France, Mondragon (Spain), UK and US with many employee-owned firms in contrast to Denmark.
Design/methodology/approach
A structured review of the literature on employee. The paper identifies different mechanisms leading to effects on productivity, job stability, distribution, investment etc., and reviews the empirical evidence. The main barriers and drivers are identified and different models for employee ownership in Italy, France, Mondragon (Spain), UK and US are reviewed to identify potential models for a country like Denmark with few employee-owned firms.
Findings
The article gives an overview over the theoretical predictions and the main empirical evidence of the effects of employee ownership. The pros are greater employee identification with the firm and increased productivity reinforced by increased participation. Employee-owned firms have more equal distribution of wages and more stable employment, and they have greater mutual control between employees and fewer middle managers. The motivation effects may be smaller for large firms and lack of capital may lead to lower levels of investments and capital per employee.
Originality/value
Comprehensive and updated literature review on the effects and successful formats of employee ownership to identify models for implementation in countries with few employee-owned firms.
L’évaluation du succès des communautés utopiques est une question importante mais souvent réduite à celle de la longévité. En nous appuyant sur les travaux de Donald E. Pitzer, et à partir de l’accès à des archives inédites, nous proposons dans cet article de réévaluer la contribution des communautés icariennes de l’Iowa (Corning) qui ont fonctionné dans la seconde moitié du XIX e siècle. Cette contribution est analysée à partir de trois dimensions : la flexibilité des règles organisationnelles ; l’innovation en matière d’activité économique ; les trajectoires individuelles revues à partir du débat ouverture/fermeture qui est central dans l’analyse de ces communautés, pouvant être vues comme des alternatives utopiques s’assimilant à terme dans la société américaine.
This paper argues that influential contemporary models of market socialism fail to do justice to traditional socialist concerns about exploitation and, by implication, about workplace oppression. More precisely, neither pure public ownership models (such as Roemer's), nor hybrid models of public ownership plus worker control (such as Schweickart's) suffice individually to attenuate exploitation and workplace hierarchy. Quite independently of alienable capital, these theories fail to account for the labour epistocracy, a class of workers who, by dint of higher marketable epistemic credentials and talents, can subjugate the labour of those with lower epistemic credentials. An improved model of market socialism would, I argue, account for the labour epistocracy by combining universal worker control with a strongly predistributive form of public ownership.
This article links two different fields of research, entrepreneurship and cooperatives, and studies whether, depending on the context, differences in terms of the fulfilment of the cooperative philosophy (cooperative essence) and entrepreneurial quality exist. To this aim, a statistical analysis is carried out using data from two Spanish regions: Andalusia and the Basque Country. The results enable us to conclude, firstly, that cooperative essence differs in relation to regional context, but not in relation to entrepreneurial quality. Secondly, cooperative essence and entrepreneurial quality are positively related, suggesting that cooperative essence may be part of the entrepreneurial quality of these kinds of firms.
The author evaluates the effects of democratic worker participation on the income distribution within firms. Wage inequality in French workers' cooperatives (called SCOPs) versus traditional firms is measured using the 2001-2012 panel DADS dataset which includes all French firms. The author finds significantly lower inequality in SCOPs, in line with the previous empirical literature. Going into more detail, it appears that inequality is reduced at the top of the distribution and specifically regarding qualification-based inequalities; the gender gap and the advantage of senior workers are not lower in SCOPs. These findings contribute to the literature on Labor-Managed Firms, as well as to the broader debate on rising wage inequality in developed countries.
We analyse empirically whether cooperatives and investor-owned firms differ in terms of productive efficiency. Using rich Portuguese panel data covering a wide range of industries, we apply two different empirical approaches to estimate potential differences in productive efficiency. The results from our benchmark random-effects model show that cooperatives are significantly less productive, on average, than investor-owned firms, both at the aggregate level and for most of the industries considered. However, the results derived from a System-GMM approach, which is our preferred empirical strategy, are much less conclusive, and we cannot conclude that cooperatives are generally less efficient that investor-owned firms. With either approach, though, we find no evidence that cooperatives are more productive than investor-owned firms in any industry.
We study a novel dataset compiled from archival records, which includes information on men's wages, union status, educational attainment, work history, and other background variables for several cities circa 1950. Such data are extremely rare for the early post-war period when U.S. unions were at their peak. After describing patterns of selection into unions, we measure the union wage premium using unconditional quantile methods. The wage premium was larger at the bottom of the income distribution than at the middle or higher, larger for African Americans than for whites, and larger for those with low levels of education. Counterfactuals are consistent with the view that unions substantially narrowed urban wage inequality at mid-century.
Cette thèse porte sur le travail dans les Société Coopératives et Participatives (SCOP). A travers l’étude de ce modèle, est proposée une analyse approfondie des inégalités au travail dans les entreprises par le biais de la structure salariale et de la répartition des coûts d’ajustement de l’activité. La thèse est divisée en quatre chapitres. Le premier chapitre compare la distribution des salaires dans les SCOP et dans les entreprises classiques (EC), en estimant des équations de salaires à partir de la base de données DADS. Le deuxième chapitre vient compléter le premier en proposant une analyse détaillée du discours des agents (à l’aide de 53 entretiens réalisés dans 38 SCOP de la région Rhône-Alpes) permettant d’identifier les principes de justice à l’œuvre dans la détermination des structures salariales mises en évidence dans le premier chapitre. Le troisième chapitre propose une analyse économétrique de l’adaptation différenciée des SCOP et des EC aux chocs de demande, par les ajustements de l’emploi, des salaires et des heures travaillées. Le quatrième chapitre explore la possibilité d’une diversité importante parmi les SCOP, notamment dans l’accès au sociétariat, qui pourrait avoir un impact sur les ajustements de l’emploi. La contribution de cette thèse au débat économique peut être résumée en trois points. Premièrement il s’agit de la première grande analyse quantitative comparative des SCOP et EC concernant l’emploi et ses caractéristiques. Deuxièmement l’enquête qualitative sur laquelle nous nous appuyons, réalisée en collaboration avec des collègues de l’Université de Grenoble est également unique puisque c’est la première enquête qualitative de cette ampleur. Son exploitation permet donc une analyse du discours des membres des SCOP qui n’avait pas été réalisé auparavant. Enfin, notre positionnement se veut également original, mobilisant des approches habituellement mises en opposition en les faisant réellement discuter autour d’un objet dont la compréhension s’en trouve enrichie.
The impact pattern of R&D intensity on firm performance is an interesting but not explicitly untangled topic in the emerging market. This study explores the topic in the context of China using a unique unbalanced panel data set for the China’s electronics manufacturing firms. In order to strengthen the robustness of the statistical results, this study employs two coherent models: pooled-OLS regression and pooled-quantile regression techniques. The pooled-OLS regressions focusing on mean effects present the robust evidence of a positive relationship between R&D intensity on firm performance, and the further pooled-quantile regressions portraying the relative importance of explanatory variables at different points of the performance distribution show that the R&D intensity exhibits a stronger impact on the better-performance firms. Our study presents some new evidence for the impact of R&D intensity on firm performance in the emerging market.
In this article we study the organizational structure of cooperatives (Jensen and Meckling, 1992), in particular the way in which pay incentives may encourage employees to adopt the strategy of their firm. Based on the findings of a field study we assert that pay plays a minor role in cooperatives, although these organizations perform efficiently, even in a period of economic crisis. Organization theory leads us to conclude that pay incentives are not effective in cooperatives whereas delegation is a strong pillar. As for control, its use varies; indeed it is sometimes resisted by managers. Complementary approaches have enabled us to identify new ways of understanding the institutional complexity of cooperatives.
We evaluate the effects of the status of worker’s cooperative on wage distribution within the firm. On a competitive labor market, the existing theory predicts that workers will be paid at the level of their marginal productivity. However, some firms have very specific wage policies. We try to measure wage inequalities in French worker’s cooperatives versus traditional firms, using the 2009-2010 DADS dataset which include 1.7 million firms, 2100 of which are SCOPs. We find much lower inequalities in SCOPs, specifically at the top of the distribution and regarding skilled-based inequalities. However, the gender gap and the advantage of national workers are not lower. Sector and regional inequalities are measured somewhat higher in cooperatives. We suggest some theoretical models to account for this pattern.
We characterize how just-selfish workers are incompatible with long-run success in workers’ cooperatives. Emphasizing mutual monitoring as key to cooperatives’ organization design to combat “shirking” we discuss what possible mixes of behavioral types in the membership of a cooperative are compatible with sustainable success. Sustainability depends on social preferences and cooperative norms that are compatible with low levels of shirking and high levels of mutual monitoring. When worker types are partly unobservable, cooperatives must be more attractive to the types of workers they value most as members. We describe measures that enhance cooperative norms and measures that mitigate adverse selection.
The authors are grateful to the French worker cooperatives federation, Confédération Générale des SCOP (CG-SCOP) for communicating the data on cooperatives and to Jean-Marie Collache and Alain Schlecht for transferring and documenting the data; and to Aurélie Charles for her excellent assistance in mounting one of the data sets. Participants in an ERMES seminar, in the IAFEP Conferences at Halifax (Canada) and Mondragon (Spain) in the European Productivity Conference in Espoo (Finland) in the Shared Capitalism session of the Academy of Management meetings at Anaheim (CA, USA) and in the ICA Research Conference at Riva del Garda (Italy) provided helpful comments on earlier versions of this work. Parts of this research were carried out while Pérotin was visiting ERMES and while Gago was visiting Leeds with funding from the Spanish government's José Castillejo Program. The mounting of one of the data sets was funded by a seedcorn grant from Leeds University Business School.
This paper investigates experimentally how a group's structure affects its ethical behavior towards a passive outsider. We analyze one vertical and two horizontal structures (one requiring consensus, one implementing a compromise by averaging proposals). We also control for internal communication. The data support our main predictions: (1) horizontal, averaging structures are more ethical than vertical structures (where subordinates do not feel responsible) and than consensual structures (where responsibility is dynamically diffused); (2) communication makes vertical structures more ethical (subordinates with voice feel responsible); (3) with communication, vertical structures are more ethical than consensual structures (where in-group bias hurts the outsider). (JEL C92, D23, L21, M14)
We examine how allowing individuals to emigrate to pay lower taxes changes the optimal nonlinear income tax scheme in a Mirrleesian economy. An individual emigrates if his domestic utility is less than his utility abroad, net of migration costs — utilities and costs both depending on productivity. A simple formula, that complements Saez's formula obtained in closed economy, is derived for the marginal tax rates faced by top-income earners. It depends on the labour elasticity, the tax rate abroad and the migration costs expressed as a fraction of the utility obtained abroad. The Rawlsian marginal tax rates, obtained for the whole population, illustrate a curse of the middle-skilled. Simulations are provided for the French economy.
We design an experiment to study the effects of social identity on preferences over redistribution. The experiment highlights the trade-off between social identity concerns and maximization of monetary payoffs. Subjects belonging to two distinct natural groups are randomly assigned gross incomes and vote over alternative redistributive tax regimes, where the regime is chosen by majority rule. We find that a significant subset of the subjects systematically deviate from monetary payoff maximization towards the tax rate that benefits their group when the monetary cost of doing so is not too high. These deviations cannot be explained by efficiency concerns, inequality aversion, reciprocity, social learning or conformity. Finally, we show that behavior in the lab helps explain the relationship between reported income and stated preferences over redistribution observed in survey data.
Using data from a large U.S. retail firm, we examine how racial matches between managers and their employees affect rates of employee quits, dismissals and promotions. We exploit changes in management at hundreds of stores to estimate hazard models with store fixed effects that control for all unobserved differences across store locations. We find a general pattern of own-race bias across all outcomes in that employees usually have better outcomes when they are the same race as their manager. But we do find anomalies in this pattern, particularly when the manager-employee match violates traditional racial hierarchies (e.g. nonwhites managing whites).
An Introduction to Survival Analysis Using Stata, Second Edition is the ideal tutorial for professional data analysts who want to learn survival analysis for the first time or who are well versed in survival analysis but not as dexterous in using Stata to analyze survival data. This text also serves as a valuable reference to those who already have experience using Stata’s survival analysis routines.
A novel experiment is used to show that the effect of a policy on the level of cooperation is greater when it is chosen democratically by the subjects than when it is exogenously imposed. In contrast to the previous literature, our experimental design allows us to control for selection effects (e.g. those who choose the policy may be affected differently by it). Our finding implies that democratic institutions may affect behavior directly in addition to having effects through the choice of policies. Our findings have implications for the generalizability of the results of randomized policy interventions.
The authors investigate how worker-owned and capitalist enterprises differ with respect to wages, employment, and capital in Italy, the market economy with the greatest incidence of worker-owned and worker-managed firms. Estimates calculated using a matched employer-worker panel data set for the years 1982-94 largely corroborate the implications of orthodox behavioral models of the two types of enterprise. Co-ops had 14% lower wages than capitalist enterprises, on average; more volatile wages; and less volatile employment. Given the quality of the data set analyzed, the authors argue, these results can be regarded as having broad generality.
This paper studies the effects of unions on the structure of wages using an estimation technique that accounts for misclassification errors in reported union status and potential correlations between union status and unobserved productivity. The model is estimated separately for five skill groups using a panel data set formed from the U.S. Current Population Survey. The results suggest that unions raise wages more for workers with lower levels of observed skills. Union workers are positively selected from the population of workers with lower levels of observed skill and negatively selected from the population with higher observed skills. Copyright 1996 by The Econometric Society.
This chapter uses data from Denmark, Finland, Norway, Sweden, Belgium, France, Germany, Italy, the Netherlands, and the United States to review the general patterns about firm wage structure, promotion, hiring, and mobility patterns. It then explores the structure of wage levels and the alternative models of interpreting these structures, before turning to wage growth rates and mobility. The main finding is that countries are remarkably similar in their structures of wage levels and of wage changes. Despite very different labor institutions across countries, the evidence favoring high within-firm wage dispersion appears across countries. Mobility levels differ across countries, but even here, mobility patterns seem relatively consistent. Despite different labor market institutions, countries do not differ dramatically in their wage patterns. Firms that allow high wage spread also have higher wages. Thus, most firms have many different jobs within the firm; wage variance is high within firms.
This collection uses economic analysis to study some of the most pressing issues in corporate law. The last decade has brought certain corporate transactions and arrangements to the forefront of public attention and public debate. At the same time, a new mode of corporate law analysis has been developed - one that uses the tools of economics to identify the consequences and desirable features of corporate law rules. By bringing together work at the frontier of this method of analysis, the volume provides a good picture of the power, current state, and future direction of the economic analysis of corporate law. Written by some of the most prominent contributors to the field, many of the chapters focus directly on the corporate control transactions that have recently attracted the most interest and controversy - corporate takeovers, buy-outs, recapitalizations, and reorganizations.
Various theories suggest that worker-managed firms (WMFs) are prone to failure in competitive environments. Using a long panel of Uruguayan firms, the author presents new evidence on firm survival by comparing WMFs with conventional firms. After excluding microenterprises and controlling for differences in the effective tax burden faced by the two types of firms, the hazard of dissolution is 29% lower for WMFs than for conventional firms. This result is robust to alternative estimation strategies based on semiparametric and parametric frailty duration models that take into account unobserved firm-level heterogeneity and impose a range of distributional assumptions about the shape of the baseline hazard. The higher survival rates of worker-managed firms seem to be associated with their greater employment stability. This evidence suggests that the marginal presence of WMFs in actual market economies cannot be explained by the fact that these firms are less likely to survive than conventional firms.
Conclusions
Using a long micropanel of Uruguayan firms, I conducted a survival analysis comparing WMFs and CFs. In contrast to the theoretical pessimism regarding the viability of workers' control in market economies, I find that WMFs exhibit lower hazard rates (longer survival times) than CFs. This finding remains robust to the exclusion of microenterprises, to the exclusion of sectors with high firm turnover, in which WMFs are less frequently observed, and to alternative estimation strategies based on semiparametric and parametric frailty models. Moreover, the results do not seem to be driven by the differential tax regime applied to WMFs. The hazard of dissolution is 29% lower for WMFs than for CFs after controlling for differences in the tax burdens faced by the two types of firms and excluding microenterprises.
This finding seems to contradict several theoretical predictions that WMFs will have performance problems and a higher risk of dissolution, related, for instance, to poor work incentives, inefficient investment and risk taking decisions, and costly collective choice problems (for a review, see Dow and Putterman 2000; Dow 2003). I do not specifically address whether or not WMFs are affected by some of these problems. Nevertheless, the evidence suggests that potential internal inefficiencies are counterbalanced by other comparative organizational advantages.
I examined several possible explanations for the results. WMFs outperform CFs under both recessionary and expansionary macroeconomic conditions, and this suggests that the greater survivability of WMFs cannot be explained merely by the fact that members exercise their control rights over the dissolution decision when outside job opportunities are scarce. Compensation flexibility does not in itself explain the higher survival chances of WMFs because firm survival is generally correlated with lower wage variability. The positive effect of workers' control on firm survival seems to be associated with the greater employment stability exhibited by WMFs. Long-term employment relationships may encourage worker-members to make firm-specific investments and facilitate organizational changes which, in turn, may increase productivity and survival prospects. In addition, workers with job security have a longer time horizon, and this would make group-based rewards and peer pressure more effective, sustaining cooperation in work teams (Levine 1992; Levine and Parkin 1994). Consistent with this argument, survey evidence comparing WMFs and CFs in Uruguay indicates that WMFs employ fewer supervisors compared with CFs, rely more on mutual monitoring among co-workers, and are more likely to introduce organizational innovations such as team work, quality groups, job rotation, and consultation mechanisms (Alves et al. 2012).
Some caveats suggest further analysis. First, direct measures of firm productivity were not available. The evidence indicates that the greater survivability of WMFs is coupled with higher wage growth compared with CFs; however, wage growth is at best a crude proxy of productivity growth at the firm level. This suggests the importance of conducting further longitudinal studies comparing performance measures other than firm survival. ⁴⁷ Second, the fact that WMFs survive longer may partially reflect self-selection by both WMFs into industries and workers into organizational forms. It may be the case that WMFs are not randomly sorted into industries but, in other words, enter industries where they might have better survival prospects. Moreover, workers may be self-selected into organizational forms according to unobservable characteristics that might also affect firm survival. As Chiappori and Salanié (2003) pointed out, the combination of unobserved heterogeneity and endogenous matching of agents to contracts is bound to create selection biases toward the parameters of interest. For instance, cooperatives may be able to attract highly motivated workers (Elster 1989). This selection problem is a potential identification threat common to all studies on WMFs based on observational data (Kremer 1997: 13). Interestingly, recent experiments on team production in which subjects are randomly assigned to “democratic” and conventional workplaces also suggest positive incentive effects associated with workers' control (Mellizo, Carpenter, and Matthews 2011). Nevertheless, the sorting process of workers into organizational forms is another important issue requiring further research.
Notwithstanding these issues, the evidence presented here suggests that the marginal share of WMFs in the population of firms and employment in Uruguay can hardly be explained by the fact that these organizations exhibit a higher hazard of failure than conventional firms. The analysis indicates the importance of focusing on both the obstacles faced by workers at the formation stage of a WMF and the growth constraints faced by incumbent WMFs.
We examine in a laboratory setting how direct participation in choosing a principle of distributive justice and a tax system impinges on subjects' attitudes and subsequent productivity when they participate in a task, produce income, and then experience losses or gains according to the tax system. Experience with a redistributive principle and its associated taxation system in a production environment does not detract from overall acceptance of the distributive principle, particularly for subjects who participate in choosing the principle. Participation in discussion, choice, and production increases subjects' convictions regarding their preferences. For these subjects (especially recipients of transfers) productivity rises significantly over the course of the experiments. No such effect is evident for subjects who do not participate in setting the regime under which they are to labor. The results' implications for questions of democratic participation and the stability of income support programs are drawn.
In some clinical, epidemiologic and animal studies multiple events, possibly of different types, may occur to the same experimental unit at different times. Examples of such data include times to tumor detection, times from remission to relapse into an acute disease phase, and times to discontinuation of an experimental medication. Methods for the statistical analysis of such data need to account for heterogeneity between subjects. This can be achieved by incorporation of additional unobserved random effects into standard survival models. We concentrate on models including frailties — unobserved random proportionality factors applied to the time-dependent intensity function. In this paper we survey some such models, exhibit connections with extensions of the standard Andersen-Gill (1982) model for multiple event times that are reminiscent of the classical results of Greenwood and Yule (1920) on “accident — proneness”, and discuss methods of inference about the frailty distribution and regression parameters. The methods are illustrated by application to some animal tumor data of Gail, Santner and Brown (1980) and to data from a recently completed large multicenter clinical trial.
We consider optimal redistribution in a model where individuals can self-select into one of several possible sectors based on heterogeneity in a multidimensional skill vector. We first show that when the government does not observe the sectoral choice or underlying skills of its citizens, the constrained Pareto frontier can be implemented with a single non-linear income tax. We then characterize this optimal tax schedule. If sectoral inputs are complements, a many-sector model with self-selection leads to optimal income taxes that are less progressive than the corresponding taxes in a standard single-sector model under natural conditions. However, they are more progressive than in canonical multi-sector economies with discrete types and without occupational choice or overlapping sectoral wage distributions.
We propose a test that uses information on workers’ mobility, wages and firms’ profits to identify the sign and strength of assortative matching. The basic intuition underlying our empirical strategy is that, in the presence of positive (negative) assortative matching, good workers are more (less) likely to move to better firms than bad workers. Assuming that agents’ payoffs are increasing in their own types allows us to use within-firm variation on wages to rank workers by their types and firm profits to rank firms. We exploit a panel data set that combines Social Security earnings records for workers in the Veneto region of Italy with detailed balance-sheet information for employers. We find robust evidence that positive assortative matching is a pervasive phenomenon in the labor market. This result is in contrast with what we find from correlating the worker and firm fixed effects in standard Mincerian wage equations.
The analysis of censored failure times is considered. It is assumed that on each individual are available values of one or more explanatory variables. The hazard function (age-specific failure rate) is taken to be a function of the explanatory variables and unknown regression coefficients multiplied by an arbitrary and unknown function of time. A conditional likelihood is obtained, leading to inferences about the unknown regression coefficients. Some generalizations are outlined. LIFEtables are one of the oldest statistical techniques and are extensively used by medical statisticians and by actuaries. Yet relatively little has been written about their more formal statistical theory. Kaplan and Meier (1958) gave a comprehensive review of earlier work and many new results. Chiang in a series of papers has, in particular, explored the connection with birth-death processes; see, for example, Chiang (1968). The present paper is largely concerned with the extension of the results of Kaplan and Meier to the comparison of life tables and more generally to the incorporation of regression-like arguments into life-table analysis. The arguments are asymptotic but are relevant to situations where the sampling fluctuations are large enough to be of practical importance. In other words, the applications are more likely to be in industrial reliability studies and in medical statistics than in actuarial science. The procedures proposed are, especially for the two-sample problem, closely related to procedures for combining contingency tables; see Mantel and Haenzel (1959), Mantel (1963) and, especially for the application to life tables, Mantel (1966). There is also a strong connection with a paper read recently to the Society by R. and J. Peto (1972). We consider a population of individuals; for each individual we observe either the time to "failure" or the time to ccloss" or censoring. That is, for the censored individuals we know only that the time to failure is greater than the censoring time. Denote by T a random variable representing failure time; it may be discrete or continuous. Let F(t) be the survivor function, %(t) = pr (T2 t)
The analysis of censored failure times is considered. It is assumed that on each individual are available values of one or more explanatory variables. The hazard function (age‐specific failure rate) is taken to be a function of the explanatory variables and unknown regression coefficients multiplied by an arbitrary and unknown function of time. A conditional likelihood is obtained, leading to inferences about the unknown regression coefficients. Some generalizations are outlined.
While intuition suggests that empowering workers to have some say in the control of the firm is likely to have beneficial incentive effects, empirical evidence of such an effect is hard to come by because of numerous confounding factors in the naturally occurring data. We report evidence from a real-effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented and worker characteristics (i.e., ability and gender).
This paper analyzes the effects of top earnings tax rates on the international migration of football players in Europe. We construct a panel dataset of top earnings tax rates, football player careers, and club performances in the first leagues of 14 Western European countries since 1985. We identify the effects of top earnings tax rates on migration using a number of tax and institutional changes: (a) the 1995 Bosman ruling which liberalized the European football market, (b) top tax rate reforms within countries, and (c) special tax schemes offering preferential tax rates to immigrant football players. We start by presenting reduced-form graphical evidence showing large and compelling migration responses to country-specific tax reforms and labor market regulation. We then develop a multinomial regression framework to exploit all sources of tax variation simultaneously. Our results show that (i) the overall location responses to the net-of-tax rate is positive and large, with an elasticity of the number of foreign players to the net-of-tax rate around one (and an elasticity of the number of domestic players around .15), (ii) location elasticities are even larger at the top of the ability distribution, but negative at the bottom due to ability sorting effects, and (iii) cross-tax effects of foreign players on domestic players (and vice versa) are negative and quite strong due to displacement effects. Those results can be rationalized in a simple model of migration and taxation with rigid labor demand.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
This paper tests a key theoretical prediction of public finance, that local redistribution induces sorting of the population so that less productive individuals are located in communities with more redistribution. Specifically, I use a longitudinal data set to test whether and to what extent the intensive redistribution practiced by Israeli kibbutzim encourages exit of more productive individuals and entry of less productive ones. The findings support the theoretical prediction. Kibbutz-leavers are more skilled than both stayers and other rural migrants and they earn higher wages upon exit than observably similar city natives and other migrants. In contrast, individuals who earn lower wages in the city are more likely to enter a kibbutz, but they are not more likely to move to other rural areas. These findings also support Borjas' hypothesis that migrants' self-selection depends on the difference in returns to skills between the origin and the destination.
This paper provides a set of sufficient conditions that point identify a quantile regression model with fixed effects. It also proposes a simple transformation of the data that gets rid of the fixed effects under the assumption that these effects are location shifters. The new estimator is consistent and asymptotically normal as both n and T grow.
Most large firms are controlled by shareholders, who choose the board of directors and can replace the firm’s management. In rare instances, however, control over the firm rests with the workforce. Many explanations for the rarity of workers’ control have been offered, but there have been few attempts to assess these hypotheses in a systematic way. This book draws upon economic theory, statistical evidence, and case studies to frame an explanation. The fundamental idea is that labor is inalienable, while capital can be freely transferred from one person to another. This implies that worker-controlled firms typically face financing problems, encounter collective choice dilemmas, and have difficulty creating markets for control positions within the firm. Together these factors can account for much of what is known about the incidence, behavior, and design of worker-controlled firms. A policy proposal to encourage employee buyouts is developed in the concluding chapter.
This paper analyzes compensation schemes which pay according to an individual's ordinal rank in an organization rather than his output level. When workers are risk neutral, it is shown that wages based upon rank induce the same efficient allocation of resources as an incentive reward scheme based on individual output levels. Under some circumstances, risk-averse workers actually prefer to be paid on the basis of rank. In addition, if workers are heterogeneous inability, low-quality workers attempt to contaminate high-quality firms, resulting in adverse selection. However, if ability is known in advance, a competitive handicapping structure exists which allows all workers to compete efficiently in the same organization.
What limits the capacity of society to redistribute? What determines the structure of compensation in organizations striving
for income equality? This paper addresses these questions by investigating the economic and sociological forces underlying
the persistence of the Israeli kibbutzim, communities based on the principle of income equality. To do this, I exploit newly
assembled data on kibbutzim and a financial crisis in the late 1980s that affected them differentially. The main findings
are that (1) productive individuals are the most likely to exit and a kibbutz's wealth serves as a lock-in device that increases
the value of staying; (2) higher wealth reduces exit and supports a high degree of income equality; and (3) ideology facilitates
income equality. Using a simple model, I show that these findings are consistent with a view of the kibbutz as providing optimal
insurance when members have the option of leaving. More generally, these findings contribute to an understanding of how mobility
limits redistribution, and to an understanding of the determinants of the sharing rule in other types of organizations, such
as professional partnerships, cooperatives, and labor-managed firms.
In modern economies, large-scale enterprise exhibits a variety of ownership forms. Most common and familiar is ownership by those persons -- individuals or organizations -- that supply the firm with financial capital. Other forms of ownership are important as well, however, including employee ownership (as in partnerships of professionals), ownership by suppliers of other factors of production (as in farm marketing cooperatives), ownership by customers (as in consumer-owned utilities, mutual insurance and banking companies, condominium housing, and business-owned wholesale, supply, and service cooperatives), nonprofit firms, and governmental enterprise. This essay briefly explores three questions raised by such a diverse pattern of ownership: First, to what extent do underlying economic factors account for variation in ownership forms across industries, across societies, and across time? Second, what is the influence of law upon these patterns? Third, to what extent has law, and particularly organizational law, adapted to facilitate the formation and management of the forms of ownership that have evolved?
Voting is a common feature of most firms. Unrestricted voting, however, can lead to unstable decision-making. The authors find that firms make trade-offs among collective decision-making, production scale, firm structure, and voter characteristics that are consistent with efforts to economize on the costs of voting. Firm responses include agenda control, restrictions to obtain a homogeneous voting population, and limits on firm size. The authors consider three long-surviving producer cooperatives, representing extreme cases of collective decision-making, and find that their organization is sensitive to the costs of voting and to the employment of mechanisms to constrain those costs. Copyright 1991 by Oxford University Press.
This paper argues that worker cooperatives are prone to redistribution among members, and that this redistribution distorts incentives. I assume that employment contracts are incomplete. In the model cooperative members pay in a capital contribution to purchase equipment. They then receive shocks to ability. Each worker's (observable) output depends on ability and on effort, neither of which can be observed separately. After ability is realized, members vote on a wage schedule as a function of output. If the median member has less than average ability, the cooperative will vote for a redistributive schedule, dulling incentives. Whereas workers in firms owned by outside shareholders would quit if the firm redistributed away from them, cooperative members will be reluctant to leave, since this entails forfeiting the dividends on their capital contribution. The model can explain why cooperatives typically have egalitarian wage policies.
When work groups support the goals of the firm, firms will want to increase group cohesiveness. If narrowing wage dispersion increases cohesiveness, then companies will pay an efficiency wage to the low end of the wage distribution. This variant of efficiency wages predicts firm wage effects, and predicts that unemployment will be concentrated among low-wage workers. Furthermore, workers at cohesive firms will have higher marginal products than will similar workers at other firms; thus, policies to encourage the growth of cohesive firms will increase national output.
Personnel economics drills deeply into the firm to study human resource management practices like compensation, hiring practices, training, and teamwork. Why should pay vary across workers within firms—and how "compressed" should pay be within firms? Should firms pay workers for their performance on the job or for their skills or hours of work? How are pay and promotions structured across jobs to induce optimal effort from employees? Why do firms use teams and how are teams used most effectively? How should all these human resource management practices, from incentive pay to teamwork, be combined within firms? Personnel economists offer new tools to analyze these questions—and new answers as well.
When working together, people engage in non-contractual and informal interactions that constitute the sociology of the group. We use behavioral models and a unique survey of medical groups to analyze how group sociology influences physician incentive pay and behavior. We conclude that informal interactions among group members influence pay practices and behaviors, but the relationship is complex. No single aspect of group sociology is entirely consistent with all the patterns in the data. Factors emphasized in the economic theory of agency, notably risk aversion, also shape pay policies but these factors cannot account for all the observed empirical relationships.
A fundamental question for economics is why large firms in market economies usually assign control rights to capital suppliers rather than labor suppliers. A diverse collection of answers can be found in the literature. But unfortunately little theoretical consensus has emerged, and few attempts have been made to resolve this issue through systematic empirical investigation. This paper reviews a number of different hypotheses clustering around work incentives, the financing of firms, and collective choice. We identify the strengths and weaknesses of each approach, filling in theoretical gaps where necessary, and conclude with some suggestions for empirical research.
Handbook of Organizational Economics
- E.P. Lazear
- P. Oyer
The Handbook of Economic Organization. Integrating Economic and Organization Theory
- J. Pencavel
Empleo remuneraciones e inversión en cooperativas de trabajadores y empresas convencionales: nueva evidencia para Uruguay Instituto de Economia - IECON
- G Alves
- B Gabriel
- P Carrasco
- A Dean
- A Rius
Essays on worker- managed firms
- G Burdin
Longitudinal analyses of the effect of trade unions
- Freeman
Employee versus conventionally-owned and controlled firms: an experimental analysis
- Frohlich
Internal pay schedules and labour mobility: the problem of firm survival
- Gui
Governing the Firm: Workers’ Control in Theory and Practice
- G. Dow