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EQUILIBRIUM UNEMPLOYMENT AS A WORKER INSURANCE DEVICE. Wage setting in worker owned enterprises

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  • albanese, marina
  • navarra, cecilia
  • Tortia, Ermanno

Abstract

Extending Shapiro and Stiglitz’s (1984) analysis of unemployment as a worker discipline device, we evidence how an economy populated by worker owned firms (WOFs), by overcoming information asymmetry on the employee side in the presence of employer opportunism (as embodied in moral hazard, hidden action and abuse of authority), can decrease, not increase equilibrium wages, while employment is necessarily higher in the presence of WOFs. Within the Shapiro and Stiglitz framework, our analysis evidences that the non-shirking constraint (NSC) for WOFs is lower for any employment and wage level than in investor owned firms (IOFs). By factoring bi-later asymmetric information and opportunism in the employment relation, our model implies that the Shapiro and Stiglitz (1984) results represent special cases in the wider analysis of equilibrium wages and employment in market economies. Relatedly, the potential for unemployment reduction and efficiency gain of worker ownership (as especially embodied in worker co-operatives, and employee-owned companies) has generally been understudied and empirical evidence coherent with this results need to be more thoroughly analysed.

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  • albanese, marina & navarra, cecilia & Tortia, Ermanno, 2017. "EQUILIBRIUM UNEMPLOYMENT AS A WORKER INSURANCE DEVICE. Wage setting in worker owned enterprises," MPRA Paper 77031, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:77031
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    Cited by:

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    2. Luigi BONATTI & Lorenza A. LORENZETTI, 2018. "Why Wages Tend To Be Lower In Worker‐Owned Firms Than In Investor‐Owned Firms," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 563-580, December.
    3. Vladislav Valentinov & Constantine Iliopoulos, 2021. "Social capital in cooperatives: an evolutionary Luhmannian perspective," Journal of Evolutionary Economics, Springer, vol. 31(4), pages 1317-1331, September.
    4. Maria Bastida & Alberto Vaquero García & Luisa Helena Pinto & Ana Olveira Blanco, 2022. "Motivational drivers to choose worker cooperatives as an entrepreneurial alternative: evidence from Spain," Small Business Economics, Springer, vol. 58(3), pages 1609-1626, March.
    5. Tortia, Ermanno C., 2021. "Employment protection regimes and dismissal of members in worker cooperatives," MPRA Paper 109214, University Library of Munich, Germany.
    6. Tortia, Ermanno Celeste, 2019. "Employment protection regimes in worker co-operatives: dismissal of worker members and distributive fairness," MPRA Paper 94536, University Library of Munich, Germany.
    7. Marina Albanese, 2020. "Social and Relational Variables in Worker Cooperatives: Implications for the Objective Function," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 9(1), pages 26-44.

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    More about this item

    Keywords

    Efficiency wage; contract failure; asymmetric information; moral hazard; worker owned enterprises;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • 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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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