Are Worker-Managed Firms Really More Likely to Fail?

48 Pages Posted: 8 Jun 2013

See all articles by Gabriel Burdin

Gabriel Burdin

University of Leeds - Faculty of Business; IZA Institute of Labor Economics

Abstract

Different theoretical explanations 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 comparing WMFs and conventional firms. 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 semi-parametric and parametric frailty duration models that impose different distributional assumptions about the shape of the baseline hazard and allow to consider firm-level unobserved heterogeneity. The greater survivability of WMFs seems to associated with the greater employment stability achieved in this type of firms. The evidence suggests that the marginal presence of WMFs in actual market economies can hardly be explained by the fact that these organizations exhibit lower survival chances than conventional firms.

Keywords: labor-managed firms, capitalist firms, survival analysis

JEL Classification: P13, P51, C41

Suggested Citation

Burdin, Gabriel, Are Worker-Managed Firms Really More Likely to Fail?. IZA Discussion Paper No. 7412, Available at SSRN: https://ssrn.com/abstract=2276304 or http://dx.doi.org/10.2139/ssrn.2276304

Gabriel Burdin (Contact Author)

University of Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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