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Equilibrium unemployment as a worker insurance device: Worker insurance and wage setting in worker owned enterprises

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  • Marina Albanese
  • Cecilia Navarra
  • Ermanno Tortia

Abstract

Shapiro and Stiglitz model on efficiency wages shows that worker owned firms perform higher levels of wage and employment than in investor owner firms, but empirical evidence doesn’t support the first result. Starting by the economic literature on workers cooperatives we extend the Shapiro and Stiglitz’s analysis by introducing horizontal control among worker members and employer opportunism. Our results reconcile theory and empirical record showing how in cooperatives both unemployment and wages can be lower than in investor owned companies.

Suggested Citation

  • Marina Albanese & Cecilia Navarra & Ermanno Tortia, 2017. "Equilibrium unemployment as a worker insurance device: Worker insurance and wage setting in worker owned enterprises," DEM Working Papers 2017/09, Department of Economics and Management.
    • Handle: RePEc:trn:utwprg:2017/09
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    References listed on IDEAS

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    Cited by:

    1. 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.

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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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