Abstract
Traditional neoclassical microeconomic theory views the production function as a "black box" where homogenous inputs go in and output comes out. Differences in labor productivity between firms are mainly due to technological constraints facing the firm. In this thesis, labor productivity is viewed as being related to the type of organization and the inner workings of the firm. Worker effort is variable and directly related to the internal operations of the firm including management-employee relations, type of compensation package and ownership structure. Worker effort is variable because of the incentives for employees to shirk and act non-cooperatively without proper monitoring schemes. Firms must prevent shirking by either instituting an environment which penalizes shirking or rewards improved worker effort. It is hypothesized that those firms which are employee-owned elicit greater worker effort than traditional private firms by tying pay to overall team performance and combining the interests of labor and capital. In addition, costly vertical monitoring schemes are diminished and supplanted by horizontal monitoring on the part of the employees. This hypothesis is tested by investigating worker behavior in employee-owned firms in the U.S. and Brazil and comparing them to private firms engaged in the same production process. Instead of using traditional labor productivity measures--such as output/worker or value added/worker--a questionnaire measuring effort, shirking and horizontal monitoring was created. Questions measuring effort and shirking have been used in previous research while those measuring horizontal monitoring were newly created. Regression equations were estimated using ordered probit, probit, tobit and OLS models. Chapter 1 explores the historical aspects of cooperatives, beginning with the debates between Aristotle and Plato involving private property. Chapters 2 and 3 investigate the effects of cooperatives on developing economies and, in particular, on Brazil. Chapters 4 and 5 involve an analysis on the theoretical and empirical effects of employee-ownership on productivity. In chapters 6 and 7 I analyze the effects of employee ownership with the use of two newly created data sets from field work in the U.S and Brazil. Questionnaires were distributed to employees in a 100% employee-owned textile firm in Brazil and a private textile firm located in the same region. Similar questionnaires were distributed to a 90%-owned ESOP manufacturing firm in Illinois and various private firms in the same region.