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A Theory of Co-operatives Based on Rights

Author

Listed:
  • Thomas H. Noe

    (Tulane University)

  • Stephen D. Smith

    (Georgia State University and Federal Reserve Bank of Atlanta)

Abstract

We investigate the role of cooperatives in the allocation of risk across agents that we call workers and holders of capital. We show that, despite the inalienability of human capital (no forced labor) and limited liability on the part of all agents, financial coalitions can implement Pareto optimal inter temporal risk sharing services for both workers and holders of capital. We specifically show how optimality can be achieved in worker preferred equiliria if individual holders of capital collectivize and jointly hire workers, who are paid wages depending on the aggregate output of the coalition. Interestingly, we also provide an example where capital preferred equilibria do not provide for optimal risk sharing and re-negotiation proofness.

Suggested Citation

  • Thomas H. Noe & Stephen D. Smith, 2002. "A Theory of Co-operatives Based on Rights," Annals of Economics and Finance, Society for AEF, vol. 3(2), pages 361-378, November.
    • Handle: RePEc:cuf:journl:y:2002:v:3:i:2:p:361-378
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Co-operatives; Rights;

    JEL classification:

    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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