Employee Representation and Flexible Working Time

This paper provides evidence on the effect of employee representation on working time flexibility in private-sector European establishments. A 2002 European Union directive granted information, consultation and representation rights to employees on a range of key business, employment and work organization issues beyond a certain firm size. We exploit the quasi-experimental variation in employee representation introduced by the implementation of the Directive in four countries (Cyprus, Ireland, Poland and the UK) with no previous legislation on the subject. The empirical analysis is based on repeated cross-section establishment-level data from the last three rounds of the European Company Survey. Difference-in-difference estimates suggest that the Directive had a positive and significant effect on both employee representation and the utilisation of flexible working-time arrangements for eligible establishments. The greater use of flexible working-time schemes is driven by establishments in which no local wage-negotiations take place and those with a high proportion of female workers. Our results are consistent with the idea that employee representation provides an endogenous rule-enforcement mechanism in second-best scenarios in which incomplete contracting problems are pervasive and third-party arbitration is unfeasible. Quite paradoxically, the relaxation of shareholders' property rights and the limits imposed on managerial discretion as a result of the operation of employee representation seem necessary to achieve certain valuable forms of organizational flexibility in market economies

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

Are high-ability individuals more likely to quit egalitarian regimes? Does the threat of exit by talented individuals restrict the redistributive capacity of democratic organizations? This paper revisits that long-standing debate by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The study exploits two novel administrative data sources: a panel of Uruguayan workers employed in both worker-managed and conventional firms; and a linked employeremployee panel data set covering the population of Uruguayan worker-managed firms and their workers from January 1997 to April 2010. A key advantage of the data is that it enables one to exploit within-firm variation on wages to construct an ordinal measure of the worker ability type. The paper's four main findings are that (1) worker-managed firms redistribute in favor of low-wage workers; (2) in worker-managed firms, high-ability members are more likely than other members to exit; (3) the hazard ratio of high-ability members is lower for founding members and for those employed by worker-managed firms in which there is less pay compression; and (4) high-ability members are less likely to quit when labor market conditions in the capitalist sector are less attractive. This paper contributes to the study of the interplay between equality and incentives that permeates many debates in public finance, comparative economic systems, personnel and organizational economics

Las decisiones de empleo y salarios de cooperativas de trabajo y empresas capitalistas : evidencia para Uruguay en base a datos de panel

The following article presents new econometric evidence on comparative behavior between worker cooperatives and capitalist firms, identifying differences in wage and employment responses. We exploit a comprehensive panel data set that covers the universe of cooperatives and their capitalist counterparts registered in social security records in Uruguay from April 1996 to December 2005. The analysis of employment and wage evolution in both types of enterprises suggests that there may be different mechanisms of adjustment to idiosyncratic price changes and macroeconomic shocks. The data set also allows us to estimate wages and employment variations for cooperative’s members and employees separately. The results of the comparison are analyzed in the light of theoretical explanations and institutional characteristics of the cooperatives’ development in Uruguay. Our findings are broadly consistent with previous studies for Italian and plywood northwest U.S. cooperatives. The importance of this research owes to the fact that comparative empirical studies of this kind are in general rare, particularly for developing countries.capitalist firms, worker cooperatives, employment, wages

Los objetivos de una empresa gestionada por sus trabajadores : un análisis sobre el caso uruguayo

The theoretical discussion concerning the comparison of employment and wage decisions between capitalist firms and worker cooperatives began with the seminal work of Ward (1958). The model assumes that worker cooperatives maximizes the net income per member instead of total profits. Even though it has been largely criticized, the Ward model has dominated the theoretical literature on worker coops. For instance, some authors have argued that worker coops are not only concerned about income per worker but also employment levels. However, the empirical content of these competing theoretical models has been rarely analyzed. In this article, following the methodology proposed by Craig and Pencavel (1993), we estimate the parameters of a generic objective function. These parameters determine the relative importance that worker coops place on income per worker vis-a-vis the level of employment. The study is based a long micro-panel of Uruguayan firms containing the entire population of worker coops and conventional firms in 31 3-digit sectors. Our results support the view that worker coops pursue mixed objectives, including both employment and income per worker.capitalist firms, worker cooperatives, firm objectives

Third-Party vs. Second-Party Control: Disentangling the Role of Autonomy and Reciprocity

This paper studies the role of autonomy and reciprocity in explaining control averse responses in principal-agents interactions. While most of the social psychology literature emphasizes the role of autonomy, recent economic research has provided an alternative explanation based on reciprocity. We propose a simple model and an experiment to test the relative strength of these two motives. We compare two treatments: one in which control is exerted directly by the principal (second-party control); and the other in which it is exerted by a third party enjoying no residual claimancy rights (third-party control). If control aversion is driven mainly by autonomy, then it should persist in the third-party treatment. Our results, however, suggest that this is not the case. Moreover, when a third party instead of the principal exerts control, control results in a greater expected profit for the principal. The implications of these results for organizational design are discussed

Are Worker-Managed Firms Really More Likely to Fail?

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

Workplace Democracy and Job Flows

This paper investigates the relationship between workplace democracy and job flows (net job creations, gross job creations and destructions) by comparing the behavior of worker-managed firms (WMFs) and conventional firms. 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: high job creation and destruction rates of hired workers and low job creation and destruction of members. This paper contributes to the literature on the role of institutions in shaping job flows. Our results may have important implications for the understanding of the allocative efficiency effects of worker participation

Social benefits in Uruguay: why do some potential beneficiaries not apply?

Includes bibliograph

Un mapa de la discusión teórica en Economía: ¿Por qué existen pocas empresas gestionadas por sus trabajadores?

The aim of the article is to review the theoretical literature that discusses a research problem seldom studied. Why worker cooperatives represent an insignificant proportion of firm's population and total employment in any contemporary market economy? We identify at least four groups of explanations that emphasize the following key determinants: i) the investment and financial problems of worker cooperatives, ii) the incentive problems that arise in labor effort regulation, iii) the costs of collective decision making process and iv) the evolution of institutions, including the relationship between wealth inequality and the organizational selection process. The article suggests a broad agenda for researchers interested in labor managed firms and comparative organizational and economic system's analysis. Moreover, it implicitly involves some relevant implications for public policies and worker cooperatives support institutions design.El presente artículo busca ofrecer una visión panorámica de la literatura teórica que aborda un problema de investigación relativamente novedoso, al menos en el medio académico local. ¿Por qué las cooperativas de trabajadores representan una proporción marginal del universo de empresas y del empleo total en cualquier economía de mercado contemporánea? En este sentido, se identifican cuatro grandes grupos de explicaciones: i) las que enfatizan los problemas de inversión y acumulación de las empresas de trabajadores, ii) las que enfatizan los problemas de monitoreo del esfuerzo y de incentivos al trabajo, iii) las que enfatizan los costos de las decisiones colectivas y iv) las que plantean la importancia del entorno institucional y de su evolución, así como la relación entre el grado de desigualdad patrimonial y los procesos de selección organizacional. El artículo sugiere una amplia agenda de investigación para aquellos interesados en el fenómeno de las empresas autogestionadas y en el análisis comparado de organizaciones y sistemas económicos. Asimismo, deja planteadas importantes implicancias para el diseño de políticas públicas e instituciones de soporte destinadas a promover la formación y el adecuado funcionamiento de este tipo de organizaciones