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The purpose of thispaper is to compare the efficiency of capitalistic and cooperative firms by focusingon the workers’ effort in production activity, when this effort is only knownto workers, thus causing information asymmetries between workers and managersof both types of firms. Therefore, our model uses a principal-agents frameworkwith workers’ hidden actions. The agency relations are not centered on theoptimal design of incentive mechanisms but on the efficient albeit incompletemanagerial monitoring of workers’ private effort. Moreover there is a trade-offbetween this monitoring activity and another managerial activity, i.e. the organization of productionprocesses. We show that, taking into account the information asymmetries thatcharacterize our model, the cooperative firm requires less monitoring than thecapitalist firm to achieve the same efficient level of workers’ effort. Thisallows the manager of the former firm to devote more working time toorganizational activity than the manager of the latter firm. In this respect,the governance of the cooperative firm dominates that of the capitalist firm. However,both types of firms need capital to operate and face different financialconstraints in terms of the capital’s purchasing cost. These financialconstraints affect the cooperative firm more severely than the capitalisticfirm. Our conclusion is that these two types of firms have specific strengthsand weaknesses, which make it difficult to reach general analytical results interms of their relative efficiency. Additionally, the financial constraintscharacterizing the cooperative firm hinder maximization of its long-term growthrate; on the other hand, this kind of firm can better exploit the virtuouscircle between increases in the employment level and increases in the growthrate.


Cooperative and Capitalistic Firms, Workers’ Effort, Governance, Agency Relations, Information Asymmetry, Social Consciousness

Cite this paper

Alessandrini, M. and Messori, M. 2016 Workers’ Effort: A Comparison between Capitalist and Cooperative Firms. Theoretical Economics Letters, 6, 601-620. doi: 10.4236-tel.2016.63066.

Autor: Michele Alessandrini1, Marcello Messori2



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