Working Paper: CEPR ID: DP15720
Authors: Francesco Caselli; Thomas Brzustowski
Abstract: We develop and formalize an equilibrium concept for a dynamic economy in which production takes place in worker cooperatives. The concept rules out allocations of workers to cooperatives in which a worker in one cooperative could move to a different cooperative and make both herself and the existing workers in the receiving cooperative better off. It also rules out allocations in which workers in a cooperative would be made better off by some of the other workers leaving. We also provide a minimum-information equilibrium-selection criterion which operationalizes our equilibrium concept. We illustrate the application of our concept and operationalization in the context of an overlapping-generation economy with specific preferences and technology. The cooperative economy follows a dynamic path qualitatively similar to the path followed by a capitalist economy, featuring gradual convergence to a steady state with constant output. Quantitatively, however, the cooperative economy features a static inefficiency, in that, for a given aggregate capital stock, firm size is smaller than what a social planner would choose. On the other hand, the cooperative economy cannot be dynamically inefficient, and could accumulate capital at a rate that is higher or lower than the capitalist economy. We also present an illustrative calibration which quantitatively compares steady-state incomes in a cooperative and in a capitalist economy.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cooperative economy (P13) | dynamic path similar to capitalist economy (P19) |
| cooperative economy (P13) | steady state with constant output (C62) |
| static inefficiency of cooperative economy (P13) | smaller firm size than social planner's choice (D21) |
| cooperative economy (P13) | varying rates of capital accumulation (E22) |
| static inefficiency of cooperatives (P13) | output gap between cooperative and capitalist economies (P13) |