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Equality under Threat by the Talented: Evidence from Worker-Managed Firms

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  • Burdin, Gabriel

    (Leeds University Business School)

Abstract

Are high-ability individuals more likely to quit egalitarian regimes? Does the threat of exit by talented individuals restrict the redistributive capacity of democratic organizations? This paper revisits that long-standing debate by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The study exploits two novel administrative data sources: a panel of Uruguayan workers employed in both worker-managed and conventional firms; and a linked employer–employee panel data set covering the population of Uruguayan worker-managed firms and their workers from January 1997 to April 2010. A key advantage of the data is that it enables one to exploit within-firm variation on wages to construct an ordinal measure of the worker ability type. The paper's four main findings are that (1) worker-managed firms redistribute in favor of low-wage workers; (2) in worker-managed firms, high-ability members are more likely than other members to exit; (3) the hazard ratio of high-ability members is lower for founding members and for those employed by worker-managed firms in which there is less pay compression; and (4) high-ability members are less likely to quit when labor market conditions in the capitalist sector are less attractive. This paper contributes to the study of the interplay between equality and incentives that permeates many debates in public finance, comparative economic systems, personnel and organizational economics.

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  • Burdin, Gabriel, 2013. "Equality under Threat by the Talented: Evidence from Worker-Managed Firms," IZA Discussion Papers 7854, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7854
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    Cited by:

    1. Nathalie Magne, 2017. "Wage inequality in workers’ cooperatives and conventional firms," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 14(2), pages 303-329, December.
    2. Callaway, Brantly & Collins, William J., 2018. "Unions, workers, and wages at the peak of the American labor movement," Explorations in Economic History, Elsevier, vol. 68(C), pages 95-118.
    3. Andrés Dean, 2023. "Membership Heterogeneity and Workplace democracy," Documentos de Trabajo (working papers) 23-19, Instituto de Economía - IECON.
    4. Marina Albanese & Cecilia Navarra & Ermanno Tortia, 2019. "Equilibrium unemployment as a worker insurance device: wage setting in worker owned enterprises," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(3), pages 653-671, October.
    5. Franck Bailly & Karine Chapelle & Lionel Prouteau, 2017. "What are the determinants of the pay gap between conventional firms and cooperatives? Evidence from France," Working Papers hal-01455741, HAL.

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    More about this item

    Keywords

    job mobility; redistribution; compensation structure; labor managed firms;
    All these keywords.

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • P0 - Political Economy and Comparative Economic Systems - - General

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