Voice and Loyalty as a Delegation of Authority: A Model and a Test on Matched Worker‐Firm Panels

Abstract

We model a mechanism that makes delegation of authority from a firm to a collective of workers profitable. Power is exchanged for loyalty. The model is tested using a matched panel of French workers and firms. For these firms, we know at two dates (1986 and 1992) whether a firm‐level agreement has been signed. Furthermore, at these two dates and for each firm, a representative sample of the employees provides information on the individuals. We show both theoretically and empirically that the voluntary signature of such an agreement induces lower employee turnover given the structure of wages.

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