Worker-managed Firms Research Articles

Worker takeovers: a comparative analysis of employee buyouts, other worker-managed firms, and conventional firms in Uruguay

Abstract 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.

Addressing the rise of inequalities: How relevant is Rawls's critique of welfare state capitalism?

Addressing the rise of inequalities: How relevant is Rawls's critique of welfare state capitalism?

Rawls’s institutional approach to justice and worker-managed firms

Rawls’s institutional approach to justice and worker-managed firms

John Stuart Mills liberaler Marktsozialismus: bisheriges Scheitern und bleibende Relevanz

AbstractJohn Stuart Mill had strong sympathies with a liberal form of market socialism based on worker-owned and worker-managed firms. He thought that only very few government interventions were needed to trigger a peaceful and spontaneous transition to such an economic system. This article recapitulates his thesis and argument by focusing on his major workPrinciples of Political Economy, which is rather neglected by philosophers, especially in the German-speaking world. I will argue that Mill was too optimistic in his hope for a spontaneous transition without government intervention. Since it is possible to reconstruct how Mill thought this transition would proceed, it is also possible to identify at what point the transition did not advance in the way envisioned by him, but was blocked by antagonistic forces. I will argue that this insight is not only of historical value, but still poses a serious problem for John Rawls’s theory of justice. Rawls follows Mill closely in his discussion of the proper economic system and he faces the same problem of transition.

Equality Under Threat by the Talented: Evidence from Worker-Managed Firms

Does workplace democracy engender greater pay equality? Are high-ability individuals more likely to quit egalitarian organisational regimes? The article revisits this long-standing issue by analysing the interplay between compensation structure and quit behaviour 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 article's key findings are that worker-managed firms have a more compressed compensation structure than conventional firms, and high-ability members are more likely than other members to exit.

Workplace democracy and job flows

This paper investigates the relationship between workplace democracy and job flows by comparing the behavior of worker-managed firms (WMFs) and conventional firms (CFs). The empirical analysis relies on high frequency administrative firm-level panel data from Uruguay over the period April 1996–July 2009. The main findings of the paper are that (1) WMFs exhibit much more stable job dynamics than CFs; (2) both types of firms have decreasing in age and increasing in size gross job creation profiles; (3) there are heterogeneous employment regimes within WMFs: job creation and destruction rates are high for hired workers and very low for members. This paper contributes to the literature on the role of institutions in shaping job flows. Our results have important implications for the understanding of the allocative efficiency effects of worker participation.

Are Worker-Managed Firms More Likely to Fail Than Conventional Enterprises? Evidence from Uruguay

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

Equality Under Threat by the Talented: Evidence from Worker-Managed Firms

Equality Under Threat by the Talented: Evidence from Worker-Managed Firms

Are Worker-Managed Firms Really More Likely to Fail?

Are Worker-Managed Firms Really More Likely to Fail?

Cooperative Firms as a New Mode of Production

The importance of the notion of ‘the mode of production’ is emphasised by all those scholars who hold that the ‘history-as-totality’ approach is the core of Marx's theory of society. Among them, Gramsci argued that while scientific advancements could shed little light on the issues with which philosophers and economists had traditionally been concerned, concepts such as ‘social relations of production’ and ‘mode of production’ had provided valuable insights for philosophical and economic inquiry. Hence our interest in the question of whether a system of producer cooperatives would actually lead to the establishment of a new mode of production. Opinions in the matter diverge greatly, and major implications stem from the distinction between worker managed firms (WMFs) and labour managed firms (LMFs), where the latter strictly segregate capital incomes from labour incomes. We conclude that LMF cooperatives do implement a new mode of production because they reverse the typical capital–labour relation right within a capitalistic system. An additional major point addressed in some detail is the main contradiction in capitalism.

Revisiting the objectives of worker-managed firms: An empirical assessment

This paper provides new evidence on the objectives pursued by worker-managed firms (WMFs). The basic neoclassical model assumes that WMFs maximizes net income per member instead of total profits (Ward, 1958). Even though it has been largely criticized, the Ward model has dominated the self-management literature. Alternative models suggest that WMFs are not only concerned about income per worker but also about the level of employment. However, the empirical content of these competing theoretical models has been rarely analyzed. This paper contributes to fill this gap by estimating the parameters of a generic welfare function, following the methodology proposed by Craig and Pencavel (1993). These parameters determine the relative importance that a WMF places on income per worker vis-a-vis the level of employment. Estimates are based on a long micro-panel of Uruguayan firms covering the entire population of Uruguayan worker-managed firm and conventional firms in 31 3-digit sectors over the period April 1996-December 2005. Following a strictly neoclassical framework, but simply allowing a more general specification of the WMF goals, we show that the assumption of the basic neoclassical model of the WMF is misleading. Our results support the view that WMFs are concerned with both employment and income per worker.

Liberalism after Burczak: redistribution, worker self-management and the market process

Abstract:InSocialism after Hayek, Theodore Burczak uses Hayekian insights to argue in favor of a socialist society with real markets, but also with wealth redistribution and prohibition of wage labor. In so doing, he offers not only a socialist vision but also asks questions that may challenge Hayekian liberals to reformulate their institutional analyses. A critical assessment that combines Austrian and institutional theories leads to the conclusion that some redistributive policies may enhance the knowledge-disseminating function of markets, but that a market order that is limited to worker-managed firms diminishes the knowledge dissemination properties of the market process.

The Most Stable Just Regime

Rawls’ssketchofajustpropertyowning-democracyremainslargelysilentonthequestionofwhetherweshouldintroducedemocraticformsofgovernmentintoeconomic life. He notes that a property-owning democracy (POD) would be fullycompatible with worker-managed firms (at least as these are envisioned by JohnStuart Mill), and that if people prefer to work in firms of this kind, then worker-managed firms may eventually eclipse traditional capitalist firms as the dominantmode of production.

The Cooperative Firm as Monitored Credit

We develop a financial-contracting theory of the cooperative fim where production requires three generic tasks: working, managing, and monitoring. Workers provide an intermediate input (or labor directly); managers convert the workers' input into a final output; and directors monitor managers. We model the cooperative firm by letting the workers act also as directors. We show how bundling the labor and monitoring tasks can expand the scope for equilibrium market activity, even when doing so results in a strictly positive deadweight loss. Our theory provides new insight with respect to a substantial theoretical and empirical literature on the life cycle of worker-managed firms, and with respect to a complementary body of anecdotal evidence on the causes of worker buyouts and cooperative degeneration. Our theory is also consistent with differences between the board compensation policies of cooperative firms, where members typically receive little more than travel and per-diem reimbursements, and of investor-owned firms, where members receive substantial pay often based in part on firm financial performance.

Wages, Employment, and Capital in Capitalist and Worker-Owned Firms

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.

Wages, Employment, and Capital in Capitalist and Worker-Owned Firms

Differences in wages, employment, and capital between worker-owned and capitalist enterprises are computed from a matched employer-worker panel data set from Italy, the market economy with the greatest incidence of worker-owned and worker-managed firms. These differences are related to orthodox models of the capitalist firm and worker co-op. The estimates of the wage, employment, and capital equations largely corroborate the implications of the behavioral models of the two types of enterprise. Co-op wages are about 14 percent lower on average and they are more volatile (and employment less volatile) than those in capitalist enterprises. Given the breadth of the data set analyzed, the results can claim to constitute general findings about capitalist and co-op enterprises.

Ownership, voting, and job creation in Russia

Job creation has had important economic and political consequences for countries in transition. Evidence from a survey of 500 firms in Russia finds that new private firms are more likely to increase employment, while worker-owned and worker-managed firms are less likely to create jobs. In addition, firm managers who expand employment appear to be a constituency for market-oriented parties. Managers whose firms added workers were significantly more likely to vote for market-oriented parties in parliamentary elections in Russia in 1999. This result suggests a micro-level link between enterprise restructuring and support for liberal parties at the ballot box.

Privatization in the Republic of Macedonia

Macedonia, as a constituent part of the former Yugoslavia, during the period 1950-89, had lived through the system of so-called social ownership, coupled with what was known as workers' self-management. These specifics secured the former Yugoslav system a separate chapter in any standard university textbook on comparative economic systems. However, as its recent economic history had shown, workers' management did not cure the major inefficiencies of the socialist-type economic system. Furthermore, the overall macroeconomic performance of the system in some areas proved to be even worse than that in the centrally planned economies. A good example of this seems to be the built-in institutional mechanisms that pushed both inflation and unemployment rates up. Workers in workermanaged firms voted for higher wages. Also, enterprises, maximizing income per worker, and not profit, tended to have a negative bias toward new hirings (the famous Ward paradox). The concept of social ownership proved to be a system of no ownership, where property rights were vague and mostly undefined. According to the Constitution, ownership of the means of production belonged to the society at large. Neither enterprises nor their employees owned the assets. This constituted, of course, fertile soil for political influence from the state and

Socialist Unemployment: The Political Economy of Yugoslavia, 1945-1990

This political analysis of unemployment in a socialist country argues that the Yugoslavian conflict stems not so much from ancient ethnic hatreds, as from the political and social divisons created by a failed socialist programme to prevent capitalist joblessness. Under communism, the concept of socialist unemployment was considered an oxymoron; when it appeared in postwar Yugoslavia, it was dismissed as illusory or as a transitory consequence of Yugoslavia's unorthodox experiments with worker-managed firms. In Woodward's view, however, it was only a matter of time before countries in the former Soviet bloc caught up with Yugoslavia, confronting the same consequences of economic reforms required to bring socialist states into the world economy. By 1895, Yugoslavia's unemployment rate had risen to 15 per cent. How was it that a labour-oriented government managed to tolerate so clear a violation of the socialist commitment to full employment? Proposing a politically-based model to explain this paradox, Woodward analyzes the ideology of economic growth and shows that international constraints, rather than organized political pressures, defined government policy. She argues that unemployment be

Worker-Managed Firms, Democratic Principles, and the Evolution of Financial Relations

(1992). Worker-Managed Firms, Democratic Principles, and the Evolution of Financial Relations. Journal of Economic Issues: Vol. 26, No. 2, pp. 605-613.