Worker Cooperatives, SSP Chart. Pencavel and Craig, 1993.

Good = labor

= labor's product.

Business cycles.


Who hires whom?

Factor Ownership.

Who owns residual profit?

1. Worker owned co-op

2. Conventional corp.

Over the business cycle--

1. Adjust wages. Spread available returns. Maximize net revenues per man hour.

2. Adjust employment. Max. profits.

(Both structures adjust inputs and outputs to demand and both survive.)

HIC Hard to monitor output in some cases, especially for knowledge workers Who makes decisions on adoption of technology, response to business cycle, & day to day routines.

1. Worker owned co-op

2. Conventional corp.

1. Workers feel in control of their environment. Quarrels among workers? Less opportunism, higher MVP, output per hour1950's & 60's, but lower 1972-80.

2. High supervision costs.

Asset specificity in human capital and houses. 1. Worker owned co-op

2. Conventional corp.

1. Protection of housing asset values.

2. Asset losses if have to sell & move because of layoffs.

The authors estimate a production function for plywood output and then test for what is being maximized by the two types of firms. The impact of changed prices is also estimated for each. Note that there are no institutions in the equations, rather a separate equation for each institution.

Consider other performance variables: mental and physical health of workers, family stability, training costs, pilfering and down time.

Paul Milgrom and John Roberts, Economics, Organization and Management, Prentice-Hall, 1992, p. 331, argue that physical capital should boss labor because 1) capital is more at risk than human capital, and 2) capital (the corporation) has the longer horizon and can therefore invest in reputation to facilitate future dealings. Is this true?

"Both the decision power and the ownership of the rents should attach to those who can most easily and effectively transfer their claims at full value. In most contexts, this would seem to be the investors in the firm, whose claims take the form of marketable securities, rather than say, laborers who would need to sell their jobs to transfer their claims. This is another reason why the boss as the person with the power to make decisions in unforseen eventualities should very often be the representative of the providers of physical capital, rather than the providers of labor." 332.