Economic growth in a cooperative economy

Brzustowski, Thomas and Caselli, Francesco ORCID: 0009-0001-5191-7156 (2025) Economic growth in a cooperative economy. Journal of the European Economic Association, 23 (3). 845 - 890. ISSN 1542-4766

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Abstract

We develop and formalise 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 refines our equilibrium concept. We illustrate the application of our concept and refinement 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. 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. As a result, steady-state income per worker could be higher or lower in the cooperative economy. We also present an illustrative calibration, which quantitatively compares steady-state incomes and welfare in a cooperative and in a capitalist economy.

Item Type:	Article
Additional Information:	© 2024 The Author(s)
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
JEL classification:	J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J54 - Producer Cooperatives; Labor Managed Firms
Date Deposited:	26 Sep 2024 10:45
Last Modified:	20 Oct 2025 19:36
URI:	http://eprints.lse.ac.uk/id/eprint/125535

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