Employee stock ownership during the Great Depression: the varying impacts of ESOPs on output growth and worker utilization

The Great Depression era provides a natural experiment to study the effects of employee stock ownership on productivity due to the unexpected nature of the stock market crash in 1929 and the predetermined expiration of employee stock offerings staggered throughout the 1930s. I collect information on employee stock ownership from reports by the National Industrial Conference Board, annual company reports and other primary sources, and then merge them with the US Census of Manufactures to form the main establishment-level dataset. The results indicate that companies with active programs had significantly lower establishment-level output growth and fewer hours worked per employee than firms with inactive ESOPs post-crash. These negative effects, however, can be mitigated in smaller firms where employees feel their effort level has non-negligible effects. To my knowledge, this is the first study to empirically investigate these early ESOPs as well as address how continuing an employee stock ownership program during a financial crisis affects productivity.