Productivity effects of worker participation in management, profit-sharing, worker ownership of assets and unionization in U.S. firms

Abstract

In this paper we provide our first econometric estimates of the effect of worker participation in decision-making, ownership and profits on productive efficiency. Participation has the potential for exerting several conflicting influences on firm performance simultaneously. As a result both the direction and magnitude of its impact are empirical issues. Previous studies have empirically measured the impact of each of these forms of participation; however, no prior study has controlled for the influence of the other forms. Because of the potential for correlation among these forms of participation, it is possible that omitted variables bias has affected the previous results. Using a new panel data set with simultaneous measures of all four types of participation in U.S. manufacturing establishments, we model participation as disembodied technical change, and estimate production function coefficients for each type while controlling for the others. We use both OLS and instrumental variables in order to guard against potential simultaneity. The IV results indicate that participation in decision-making has a large positive productivity effect while the impacts of unionization and profit-sharing depend upon regression specification. Moderate amounts of indirect worker ownership affect productivity positively, while the estimated effect of direct worker ownership is negative. However, this last result may reflect the industrial concentration of the direct ownership firms in our sample.