New evidence on wages and employment in worker cooperatives compared with capitalist firms

Abstract

This article presents new econometric evidence on the comparative behavior of worker cooperatives and capitalist firms, highlighting the differences in wages and employment responses. We use a comprehensive panel data set that covers the entire population of cooperatives and their capitalist counterparts registered in the social security records in Uruguay from April 1996 to December 2005. We analyze the data to study the employment and wage decisions in both types of enterprises, the results of which suggests that their adjustment mechanisms to idiosyncratic price changes and macroeconomic shocks may differ greatly. The data set also allows us to estimate wage and employment variations for members and non-members of cooperatives separately, and provides an empirical test for the so-called degeneration hypothesis. Our findings are broadly consistent with previous studies for Italian cooperatives and plywood cooperatives in the United States. As studies of this kind are so few, our research provides a significant contribution to the empirical literature on labor managed firms. Moreover, comparing worker cooperatives and capitalist firms offers an exceptional opportunity to determine how control by workers may lead to different organizational behavior.