Producer Co‐Operatives

Abstract

In producer co‐operatives (PCs), decision‐making and ownership lie with the firm's workforce. Typically, the PC sector is of marginal economic significance – interest in PCs stems primarily from features such as democratic governance. Comparing PCs with capitalist firms (CFs) we find that PCs are larger, are not confined to particular industries, have a pronounced productivity edge, and have survival rates at least as good. Entry is a key problem for PCs, and formations respond pro‐cyclically to unemployment while there are important network effects. No persuasive evidence exists for the alleged tendency of PCs to degenerate or for underinvestment. While CFs adjust employment in response to product price changes and demand shocks, in response to similar perturbations PCs adjust pay more than employment. Within‐firm inequality is lower in PCs, though this may lead to loss of talent. Evidence on worker outcomes such as job satisfaction sometimes suggests poorer outcomes for workers in PCs. Significantly larger PC sectors are unlikely to result from policies promoting “recovered” companies. To better understand many issues, improved and comparative data sets – for both sets of firms and individual enterprises, and with a broader range of crucial variables – are needed. Two underdeveloped theoretical issues are the role of co‐operative networks and the relationship between PCs and social capital.