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|
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- Grossman, Sanford J & Hart, Oliver, 1985.
"The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration,"
CEPR Discussion Papers
70, C.E.P.R. Discussion Papers.
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- Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
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"Property Rights and the Nature of the Firm,"
495, Massachusetts Institute of Technology (MIT), Department of Economics.
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- Oliver Hart & John Moore, 1996.
"The Governance of Exchanges: Members' Co-operatives Versus Outside Ownership,"
STICERD - Theoretical Economics Paper Series
/1996/292, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press, vol. 12(4), pages 53-69, Winter.
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