Advances in the Economic Analysis of Participatory & Labor-Managed Firms: Volume 7

This paper attempts to analyze the effects that shopfloor participation has on firm performance and examine if cooperatives show better results than capitalist firms. Moreover, it tries to study if the impact of participation on performance is different in cooperatives and capitalist firms. To fulfill these objectives information about 965 Spanish manufacturing plants with at least fifty employees is used. The results indicate that there are not significant differences in the performance of cooperatives and the rest of companies. Our findings also show that the introduction of participatory practices generates positive outcomes both for capitalist firms and cooperatives, without differences in the magnitude of the impact.

The impact of unions on productivity growth has received extensive attention from researchers in industrial relations and economics. Despite a voluminous literature, controversy continues regarding the effect of unions on productivity growth. In this paper, meta-analysis and meta-regression analysis is used to quantify the association between unions and productivity growth and to accomplish a quantitative assessment of the empirical literature. The results indicate that the overall association between unions and productivity growth is negative, especially for the U.S. The search for moderator variables revealed that most of the variation in the published results is artificial and can be attributed to specification differences.

This study uses data from a 90% employee owned ESOP and six comparable private firms in the same region to investigate the effects of employee ownership and participation on effort, shirking and horizontal monitoring. Participation turns out to be a strong determinant of effort and horizontal monitoring. It was found that, on average, employees who perceive their participation level to be higher will, on average, exert greater effort, have an incentive to horizontally monitor and engage in horizontal monitoring. It is also found that participation does not have to be coupled with employee ownership to elicit motivational effects. Firms without employee ownership may achieve efficiency gains from increasing workers' perception of their level of participation in the firm.

Since Kornai (1980), the adverse effects of soft budget constraints have been well-documented in the literature. More recently, several theoretical explanations for the presence of soft budget constraints have been put forward. The purpose of this paper is to empirically test these theories on the causes of soft budget constraints. We therefore use a panel data set, consisting of company account data for Bulgarian and Romanian manufacturing firms, covering the period 1995–1999. Our results suggest that the probability of finding soft budget constraints importantly depends on the degree of competition within the sector and on the ownership structure of the firm. We further find that sociopolitical concerns about employment increase the probability of soft budget constraints, but only when firms are loss making. Thus, our empirical results largely confirm the hypotheses that competition, privatization, and firm size matter in explaining soft budget constraints, as is suggested in the theoretical models on the causes of soft budget constraints.

This paper uses a substantial international database to provide the widest and the most detailed analysis to date of financial participation across Europe. It explores the antecedents of broad-based share ownership and profit sharing schemes. It is found that country effects are important predictors of both profit sharing and share ownership schemes. Share ownership schemes are also associated with company size, stock market listing and some measures of HRM ‘sophistication’. Employee participation and representation have weak relationships with financial participation.

This paper examines the observed complementarity between the use of profit sharing and the delegation of decision making power to production line workers. The paper makes use of a new economy wide data set which provides information on pay and decision making for a large number of production workers. A principal-agent model is presented to guide the empirical analysis. An empirical model is presented that allows the use of profit sharing and the delegation of decision making power to be explicit complements and for this complementarity to vary with observable and unobservable characteristics of the workers. Two major results are derived from the theoretical model and supported by the empirical analysis. First, workers with greater than two years experience are more valuable decision makers. Second, conditional on the worker having decision making, profit sharing is of a greater value to the firm when demand for the firm's product is volatile.

In this paper, we develop, analyze, and test the hypothesis that partial employee ownership may be used as an institutional arrangement to economize on the costly problem of ex post opportunism inherent in the investment of specific human capital. Based on a unique survey of 655 British firms, we examine the empirical link between the likelihood of partial employee ownership and the presence of specific human capital, as well as uncertainty (internal and external) and frequency of transaction. Adjusted for possible structural differences, empirical evidence suggests considerable support for our hypothesis. Our results are also broadly consistent with the Transaction Cost Economics idea that institutional arrangements can be analyzed as transaction cost minimizing choices to govern specific transactions by providing economizing degrees of ex ante incentive compatibility and ex post contractual safeguard.

The paper studies bargaining over workers' benefits which are due some time in the future. A union bargains on behalf of a workforce which may be diverse in the sense that workers' probabilities of staying with the firm vary. Bargaining structure, rather than the bargaining power of the union, is found to be the driving force in the model for determining the level of benefits. A further key issue is that of whose preferences are represented in the union's objective function, and thereby in the bargaining process.

Using empirical evidence and theoretical analysis we show the fallacy of globalization through free international trade. A new and more comprehensive destructive trade analysis indicates that free international trade per se is likely to worsen world economic conditions and especially those of the poor majority of mankind. The dramatic gap estimated by UNDP between the rich and the poor of the world, and its continuing worsening over the past forty years, are both the cause and the effect of destructive trade. Thus it appears that free-trade globalization involves a state of instability and explosiveness.