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Buying Out the Means of Production: Wages and Productivity in Labor-Managed Firms

Author

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  • Elia Benveniste

Abstract

This paper studies the effect of labor management - majority employee ownership of a firm - on firm-level wage distributions and performance. Using matched employer-employee data from Italy, I exploit worker buyouts (WBOs) as sharp transitions from conventional ownership to labor management. I compare WBO firms to observationally similar restructuring firms that remain conventionally owned. Labor management reduces base wages by 9 percent, but (insignificantly) increases total compensation when accounting for profit-based labor dividends. Within-firm wage inequality decreases markedly, and firms become significantly less hierarchical. I find no evidence of lower productivity or reduced investment. Overall, labor management generates substantial within-firm wage compression without reduced operational efficiency.

Suggested Citation

  • Elia Benveniste, 2026. "Buying Out the Means of Production: Wages and Productivity in Labor-Managed Firms," RFBerlin Discussion Paper Series 26117, ROCKWOOL Foundation Berlin (RFBerlin).
    • Handle: RePEc:crm:wpaper:26117
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    Keywords

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • P13 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises

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