Grupos de Investigación

DT 12/13 - Equality under threat by the talented: evidence from worker-managed firms

ISSNISSN/ISBN: 1510-9305 / 1688-5090
Nº de PáginasNº de Páginas: 39
Are high-ability individuals more likely to quit egalitarian regimes? Does the threat of exit by
talented individuals restrict the redistributive capacity of democratic organizations? This paper
revisits that long-standing debate by analyzing the interplay between compensation structure
and quit behavior in the distinct yet underexplored institutional setting of worker-managed
firms. The study exploits two novel administrative data sources: a panel of Uruguayan workers
employed in both worker-managed and conventional firms; and a linked employer–employee
panel data set covering the population of Uruguayan worker-managed firms and their workers
from January 1997 to April 2010. A key advantage of the data is that it enables one to exploit
within-firm variation on wages to construct an ordinal measure of the worker ability type. The
paper's four main findings are that (1) worker-managed firms redistribute in favor of low-wage
workers; (2) in worker-managed firms, high-ability members are more likely than other
members to exit; (3) the hazard ratio of high-ability members is lower for founding members
and for those employed by worker-managed firms in which there is less pay compression; and
(4) high-ability members are less likely to quit when labor market conditions in the capitalist
sector are less attractive. This paper contributes to the study of the interplay between equality
and incentives that permeates many debates in public finance, comparative economic systems,
personnel and organizational economics.

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