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How do worker cooperatives stabilize employment? The role of profit reinvestment into locked assets

  • Cecilia Navarra

    ()

    (Center for Research in the Economics of Development, University of Namur)

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    A frequent characteristic of worker cooperatives is the tendency to reinvest a large share of profits into asset locks: a common fund, indivisible and not appropriable by members, neither upon quitting, nor at the end of the firm’s life. To explain this behaviour, I introduce the hypothesis that asset locks play a significant role in employment stabilization. This can be obtained in two ways: by letting wages fluctuate, or by accumulating reinvested profits into an income stabilizing fund that allows to face downturns without firing and without reducing wages. In this second case, asset locks play a wage smoothing role. I provide evidence for this function by means of original data at the firm level and by first-hand collected survey data at the individual level on risk perception in a sample of Italian cooperatives.

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    File URL: http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1307.pdf
    File Function: First version, 2013
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    Paper provided by University of Namur, Department of Economics in its series Working Papers with number 1307.

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    Length: 28 pages
    Date of creation: Jun 2013
    Date of revision:
    Handle: RePEc:nam:wpaper:1307
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