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Productivity, Capital and Labor in Labor-Managed and Conventional Firms

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  • Fathi Fakhfakh
  • Virginie Perotin
  • Monica Gago

Abstract

Despite a continuing interest in the compared efficiency of labor-managed and conventional firms, only a handful of comparative empirical studies exist. These studies suggest that labor-managed firms have the same productivity levels as conventional ones, but organize production differently. However, the data used in these studies cover a single industry, or firms matched by industry and size in manufacturing, and concern a few dozen firms. In addition, the use of constant-elasticity production functions in past studies has made it difficult to distinguish the effects of incentives embodied in the factors of production from those of scale differences that could be caused by the differences in factor demand behavior between conventional and labor-managed firms hypothesized by economic theory. The paper compares the productivity of labor-managed and conventional firms using two new panel data sets covering several thousand firms from France, including representative samples of conventional firms and all worker cooperatives with 20 employees or more in manufacturing and services. We present Generalized Least Squares (GLS) and Generalized Moments Method (GMM) estimations of translog production functions industry by industry for cooperative and conventional firms and test for the equality of their total factor productivities. We also allow systematic differences in scale and technology to be determined by the ownership form. The translog specification, which allows returns to scale to vary with input levels, makes it possible to disentangle embodied incentive effects from systematic differences in scale due to underinvestment in labor-managed firms. In the process, we also propose updated "stylized facts" about labor-managed firms in comparison with conventional firms. Our production function estimates suggest that cooperatives are at least as productive as conventional firms. However, the two types of firms organize production differently. Cooperatives are mor
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  • Fathi Fakhfakh & Virginie Perotin & Monica Gago, 2011. "Productivity, Capital and Labor in Labor-Managed and Conventional Firms," TEPP Working Paper 2011-08, TEPP.
    • Handle: RePEc:tep:teppwp:wp11-08
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    2. Mikko MAKINEN & Derek C. JONES, 2015. "Comparative Efficiency Between Cooperative, Savings And Commercial Banks In Europe Using The Frontier Approach," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 401-420, September.
    3. Burdin, Gabriel, 2013. "Are Worker-Managed Firms Really More Likely to Fail?," IZA Discussion Papers 7412, Institute of Labor Economics (IZA).
    4. John Pencavel, 2013. "Worker cooperatives and democratic governance," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 24, Edward Elgar Publishing.
    5. Gabriel Burdín, 2014. "Are Worker-Managed Firms More Likely to Fail Than Conventional Enterprises? Evidence from Uruguay," ILR Review, Cornell University, ILR School, vol. 67(1), pages 202-238, January.
    6. Loek Groot & Daan van der Linde, 2017. "The Labor-Managed Firm: Permanent or Start-Up Subsidies?," Journal of Economic Issues, Taylor & Francis Journals, vol. 51(4), pages 1074-1093, October.
    7. Virginie Pérotin, 2013. "Worker Cooperatives: Good, Sustainable Jobs in the Community," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 2(2), pages 34-47, May.
    8. Sebastián Berazategui & Emilio Landinelli & Daniel Ramírez, 2013. "Una comparación del comportamiento innovador entre Cooperativas de Trabajo y Empresas Capitalistas en Uruguay," Documentos de Investigación Estudiantil (students working papers) 13-02, Instituto de Economía - IECON.
    9. Pencavel, John, 2015. "The labor supply of self-employed workers: The choice of working hours in worker co-ops," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 677-689.
    10. Gabriel Burdín, 2016. "Equality Under Threat by the Talented: Evidence from Worker‐Managed Firms," Economic Journal, Royal Economic Society, vol. 126(594), pages 1372-1403, August.

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