Buying Out the Means of Production: Wages and Productivity in Labor-Managed Firms

Elia Benveniste

No 26117, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: This paper studies the effect of labor management - majority employee ownership of a firm - on firm-level wage distributions and performance. Using matched employer-employee data from Italy, I exploit worker buyouts (WBOs) as sharp transitions from conventional ownership to labor management. I compare WBO firms to observationally similar restructuring firms that remain conventionally owned. Labor management reduces base wages by 9 percent, but (insignificantly) increases total compensation when accounting for profit-based labor dividends. Within-firm wage inequality decreases markedly, and firms become significantly less hierarchical. I find no evidence of lower productivity or reduced investment. Overall, labor management generates substantial within-firm wage compression without reduced operational efficiency.

Keywords: labor management; worker buyouts; wage compression (search for similar items in EconPapers)
JEL-codes: G34 J31 J54 M54 P13 (search for similar items in EconPapers)
Date: 2026-04
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:26117

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