Abstract

http://ssrn.com/abstract=44599
 
 

Citations (8)



 


 



Why are Worker Cooperatives so Rare?


Michael Kremer


Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER); Center for Global Development

July 1997

NBER Working Paper No. w6118

Abstract:     
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.

Number of Pages in PDF File: 38

working papers series


Download This Paper

Date posted: May 15, 1998  

Suggested Citation

Kremer, Michael, Why are Worker Cooperatives so Rare? (July 1997). NBER Working Paper No. w6118. Available at SSRN: http://ssrn.com/abstract=44599

Contact Information

Michael Kremer (Contact Author)
Harvard University - Department of Economics ( email )
Littauer Center
Rm. 207
Cambridge, MA 02138
United States
Brookings Institution
1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Center for Global Development
2055 L St. NW
5th floor
Washington, DC 20036
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,503
Downloads: 56
Download Rank: 220,989
Citations:  8

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.250 seconds