Workplace Democracy in the Lab

While intuition suggests that empowering workers to have some say in the control of the firm is likely to have beneficial incentive effects, empirical evidence of such an effect is hard to come by because of numerous confounding factors in the naturally occurring data. We report evidence from a real-effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented and worker characteristics (i.e., ability and gender).real-effort experiment, workplace democracy, decision control rights

Workplace democracy in the lab

While intuition suggests that empowering workers to have some say in the control of the firm is likely to have beneficial incentive effects, empirical evidence of such an effect is hard to come by because of numerous confounding factors in the naturally occurring data. We report evidence from a real-effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented and worker characteristics (i.e., ability and gender)

Essays on Behavioral Labor Economics

Economists typically understand the firm as an organization comprised of a series of incomplete contracts among input suppliers (e.g. Coase, (1937), Williamson, (1985)). The ultimate right to make decisions that are not subject to a pre-existing contractual arrangement - hereafter referred to as decision-control rights, are assigned to some person or group associated with the enterprise. The entity with decision-control rights has the final say over how to organize essential firm operations that range from the determination of production techniques, to deciding how to monitor or compensate the firm\u27s members. To the extent that firm members have competing interests or are asymmetrically affected by such decisions, those members with decision-control rights may be confronted with important normative issues regarding which firm objectives should be pursued. In my dissertation, I employ a behavioral economic perspective in order to examine how workplace governance practices interact with both the level of satisfaction and motivation of workers. In the first essay of the dissertation, I collected data from a real-effort experiment to compare changes in the performance of research participants that were subjected to an identical set of wage incentives that were either implemented (1) endogenously by the group to which subjects belong through a simple majority vote, (2) endogenously by only one member of the group who had all decision-control rights, or (3) a random process completely exogenous to the group. The 3 (3 distinct decision-control rights regimes) X 2 (2 distinct incentive contracts) between-subjects design allows for a clean comparison of performance under different decision-control rights treatments. I report evidence suggesting that the decision-control rights arrangement used to select the compensation contract can significantly influence the subsequent level of performance of research subjects. The second essay (co-authored with Michael Carr), analyzes the relative effects of voice, autonomy, and wages in explaining job satisfaction using subjective evaluations of work conditions and satisfaction recorded in the 2004 wave of the Workplace Employment Relations Survey (WERS). We show that the amount of autonomy and voice that a worker has over the firm is an important omitted variable, biasing the estimated coefficient on the wage upwards. And, conditional upon having a job, voice and autonomy are considerably more important determinants of job satisfaction than the wage. The final essay offers a critique of the traditional economics of work organization in consideration of the literature developed in behavioral and experimental economics. I argue that many models of worker motivation developed using the rational choice model (RCM) carry the cost of ignoring common sentiments and behaviors that have been systematically demonstrated in experimental studies. After providing an extensive review of the experimental economics literature as it may inform various workplace organizational faculties, I conclude that the literature suggests that establishment of work teams and incentive schemes that reward teams for collective success would carry the expectation of sustained satisfaction and productivity of workers more than firm environments that rely on employee competition as a motivational device

Ceding control: an experimental analysis of participatory management

We use an experiment to evaluate the effects of participatory management on firm performance. Participants are randomly assigned roles as managers or workers in firms that generate output via real effort. To identify the causal effect of participation on effort, workers are exogenously assigned to one of the two treatments: one in which the manager implements a compensation scheme unilaterally or another in which the manager cedes control over compensation to the workers who vote to implement a scheme. We find that output is between seven and twelve percentage points higher in participatory firms

Workplace democracy in the lab

While intuition suggests that empowering workers to have some say in the control of the firm is likely to have beneficial effects, empirical evidence of such effects is hard to come by because of numerous confounding factors in the naturally occurring data. We report evidence from a real‐effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented, worker characteristics such as ability and gender, and possible sorting

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. © by Cornell University