The standard explanation of wage rigidity in principal agent and in efficiency wage models is related to worker risk aversion. However, these explanations does not consider at least two important classes of empirical evidence: (1) In worker cooperatives workers appear to behave in a less risk averse way than in for profit firms and to accept fluctuating wages; (2) The emerging experimental evidence on the employment contract show that most workers prefer higher but more uncertain wages to lower fixed wages. Workers do not appear to express a preference for fixed wages in all situations, since the empirical evidence clearly show that different ownership forms, in our case worker cooperatives and investor owned, for profit firms, behave in different ways when dealing with the trade-off between wage rigidity and employment fluctuations. More specifically, worker cooperatives are characterized, in relative terms, by fixed employment levels and fluctuating wages, while for profit firms are characterized by fixed wages and fluctuating employment levels. Our paper reinterprets these stylized facts by focusing on the relationship between wage rigidity and worker risk aversion in light of the presence of the risk of employer post contractual opportunism connected with the presence of private information and diverging objectives relative to the employee. The idea of employer moral hazard is able to disentangle the observed behavioural differences between different ownership forms. By resorting to the standard efficiency wage framework, we show that, in the presence on employer moral hazard, employees in capitalistic firms generally prefer fixed wage, accepting this way a positive risk of lay off. On the contrary, worker members in worker cooperatives choose fluctuating wages in order to minimize the risk of lay-off.

ON THE MACROECONOMIC CONSEQUENCES OF WORKER CONTROL ON WAGES AND EMPLOYMENT

ALBANESE, MARINA;
2015

Abstract

The standard explanation of wage rigidity in principal agent and in efficiency wage models is related to worker risk aversion. However, these explanations does not consider at least two important classes of empirical evidence: (1) In worker cooperatives workers appear to behave in a less risk averse way than in for profit firms and to accept fluctuating wages; (2) The emerging experimental evidence on the employment contract show that most workers prefer higher but more uncertain wages to lower fixed wages. Workers do not appear to express a preference for fixed wages in all situations, since the empirical evidence clearly show that different ownership forms, in our case worker cooperatives and investor owned, for profit firms, behave in different ways when dealing with the trade-off between wage rigidity and employment fluctuations. More specifically, worker cooperatives are characterized, in relative terms, by fixed employment levels and fluctuating wages, while for profit firms are characterized by fixed wages and fluctuating employment levels. Our paper reinterprets these stylized facts by focusing on the relationship between wage rigidity and worker risk aversion in light of the presence of the risk of employer post contractual opportunism connected with the presence of private information and diverging objectives relative to the employee. The idea of employer moral hazard is able to disentangle the observed behavioural differences between different ownership forms. By resorting to the standard efficiency wage framework, we show that, in the presence on employer moral hazard, employees in capitalistic firms generally prefer fixed wage, accepting this way a positive risk of lay off. On the contrary, worker members in worker cooperatives choose fluctuating wages in order to minimize the risk of lay-off.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11588/610310
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