Equality Under Threat by the Talented: Evidence from Worker-Managed Firms

Abstract

Does workplace democracy engender greater pay equality? Are high‐ability individuals more likely to quit egalitarian organisational regimes? The article revisits this long‐standing issue by analysing the interplay between compensation structure and quit behaviour in the distinct yet underexplored institutional setting of worker‐managed firms. The analysis is based on novel administrative data sources, which allow constructing a simple ordinal measure of the workers’ ability type. The article’s key findings are that worker‐managed firms have a more compressed compensation structure than conventional firms, and high‐ability members are more likely than other members to exit.

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