Does Employee Ownership Improve Incentives for Efforts
This paper provides a theoretical framework to analyze workers' incentives under different ownership. It shows that the workers' effort and expected income are higher and the monitoring intensity is lower in the employee-owned firm than in the capitalist firm. Unlike in previous models, the advantage of employee ownership here does not depend on the size of the firm. It also shows that the advantage of employee ownership increases as workers' reservation wage decreases, the monitoring cost and productivity uncertainty increases. Finally, it discusses the relevance of the theory to employee stock-ownership program (ESOP) and profit sharing.
|Date of creation:||Aug 1995|
|Date of revision:|
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- Oliver Hart & Sanford Grossman, 1985.
"The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration,"
372, Massachusetts Institute of Technology (MIT), Department of Economics.
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"Property Rights and the Nature of the Firm,"
3448675, Harvard University Department of Economics.
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Oxford Review of Economic Policy,
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- Oliver Hart & John Moore, 1996. "The Governance of Exchanges: Members' Co-operatives Versus Outside Ownership," STICERD - Theoretical Economics Paper Series 292, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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