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Abstract
The author evaluates the effects of democratic worker participation on the income distribution within firms. Wage inequality in French workers' cooperatives (called SCOPs) versus traditional firms is measured using the 2001-2012 panel DADS dataset which includes all French firms. The author finds significantly lower inequality in SCOPs, in line with the previous empirical literature. Going into more detail, it appears that inequality is reduced at the top of the distribution and specifically regarding qualification-based inequalities; the gender gap and the advantage of senior workers are not lower in SCOPs. These findings contribute to the literature on Labor-Managed Firms, as well as to the broader debate on rising wage inequality in developed countries.
JEL: J54, D21, J31, P13
Key words: Worker cooperatives, inequality, wage equation.
(ProQuest: ... denotes formulae omitted.)
1.Introduction
Explaining the increase of wage inequality has been a challenge for economists since the 1980s. At the level of the firm, there is no consensus to explain the deviations from marginal productivity remuneration. At a macro level, large inequalities are recognized as having a detrimental effect on growth and economic stability, specifically since the 2008 crisis (Dabla-Norris et al. 2015). A micro approach sheds light on the dynamics of wage inequality and cooperatives are a very good natural laboratory as democracy's effect on income distribution can be observed. Furthermore, the consequences of workers' participation on wage distribution can be studied with relation to effort incentive, worker selection and turn-over. There are many reasons to think that worker participation in decision making in firms should lead to lower wage inequality. Theoretically the median voter theory leads to the conclusion that, in cooperatives where workers vote democratically, there will be a redistribution of wealth whenever the median income is lower than the mean (Kremer 1997). Another point of view considers ex ante selection: agents who choose to work in a cooperative are likely to have a strong aversion to inequality. On the other hand, if cooperatives are operating side by side with conventional firms in a competitive market, they might not be able to have a significantly different wage structure in the long term. An empirical answer is thus required to the question of whether or not the wage structure actually differs between cooperatives and...