EQUILIBRIUM UNEMPLOYMENT AS A WORKER INSURANCE DEVICE. Wage setting in worker owned enterprises
Marina Albanese (),
Cecilia Navarra and
Ermanno Tortia ()
MPRA Paper from University Library of Munich, Germany
Extending Shapiro and Stiglitz’s (1984) analysis of unemployment as a worker discipline device, we evidence how an economy populated by worker owned firms (WOFs), by overcoming information asymmetry on the employee side in the presence of employer opportunism (as embodied in moral hazard, hidden action and abuse of authority), can decrease, not increase equilibrium wages, while employment is necessarily higher in the presence of WOFs. Within the Shapiro and Stiglitz framework, our analysis evidences that the non-shirking constraint (NSC) for WOFs is lower for any employment and wage level than in investor owned firms (IOFs). By factoring bi-later asymmetric information and opportunism in the employment relation, our model implies that the Shapiro and Stiglitz (1984) results represent special cases in the wider analysis of equilibrium wages and employment in market economies. Relatedly, the potential for unemployment reduction and efficiency gain of worker ownership (as especially embodied in worker co-operatives, and employee-owned companies) has generally been understudied and empirical evidence coherent with this results need to be more thoroughly analysed.
Keywords: Efficiency wage; contract failure; asymmetric information; moral hazard; worker owned enterprises (search for similar items in EconPapers)
JEL-codes: D21 D86 J31 J54 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/77031/1/MPRA_paper_77031.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/77034/1/MPRA_paper_77034.pdf revised version (application/pdf)
Journal Article: Equilibrium unemployment as a worker insurance device: wage setting in worker owned enterprises (2019)
Working Paper: Equilibrium unemployment as a worker insurance device: Wage setting in worker owned enterprises (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:77031
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().