{"insight":{"id":"72743763","lede":"The \"hold-up hypothesis\" suggests that giving workers power in corporate governance will lead to an increase in labor's share of firm profits. Evidence from Finnish codetermination does not support this concern.","slug":"finnish-codetermination-did-not-lead-to-an-increase-in-labor-s-share-of-a-firm-s","title":"Finnish codetermination did not lead to an increase in labor's share of a firm's profits","showTitleAsQuote":null,"epistemicStatus":"empirical","reports":[{"id":"69359365","title":"Codetermination","slug":"codetermination"}],"tags":[{"slug":"economic-democracy","name":"Economic Democracy","id":"69609474","lede":"

Since Alexis de Tocqueville's analysis of agrarian America in the 1800's, the ideals of liberty and equality have often been seen as in conflict.

\n\n

But as Robert Dahl writes: "...the agrarian economy and society on which it was based underwent a revolutionary transformation into a new system of commercial and industrial capitalism that automatically generated vast inequalities of wealth, income, status, and power. These inequalities were in turn a result of liberty of a certain kind–liberty to accumulate unlimited economic resources and to organize economic activity into hierarchically governed enterprises."

\n\n

Or, as David Schweickart comments: "Contemporary capitalism celebrates democracy, yet denies us our democratic rights at precisely the point where they might be utilized most immediately and concretely: at the place where we spend most of the active and alert hours of our adult lives."

\n\n

Economic democracy, broadly, is the idea that decision-making power should not be the exclusive right of managers and shareholders, but held in equal by all stakeholders affected by those decisions. In practice, both Dahl & Schweickart see "workplace democracy" - from codetermination to worker-owned cooperatives - as one concrete manifestation of economic democracy.

\n","ledeExcerpt":"Economic democracy, broadly, is the idea that decision-making power should not be the exclusive right of managers and shareholders, but held in equal by all stakeholders affected by those decisions. In practice, both Dahl & Schweickart see \"workplace democracy\" - from codetermination to worker-owned cooperatives - as one concrete manifestation of economic democracy.","featured":null},{"slug":"efficiency","name":"Efficiency","id":"72743745","lede":"

In general, efficiency refers to maximizing outputs while minimizing inputs.

\n\n

In economic contexts, there are two main types of efficiency: microeconomic efficiency (where system efficiency is understood as maximizing a particular output given available inputs), and the efficient-market hypothesis (a state where asset prices reflect all available information).

\n","ledeExcerpt":"In general, efficiency refers to maximizing outputs while minimizing inputs. \n\nIn economic contexts, there are two main types of efficiency: microeconomic efficiency (where system efficiency is understood as maximizing a particular output given available inputs), and the efficient-market hypothesis (a state where asset prices reflect all available information).","featured":true},{"slug":"growth","name":"Growth","id":"23932836","lede":"

We define growth as the expansion of wealth in society; growth is about generating a "a bigger pie".

\n\n

Amidst debates over the merits of continued growth, we begin with the idea that all else equal, a society with growth, with more wealth, is preferable to one with less. Without growth, society becomes a zero-sum distributional game: anyone's gain is another's loss. Growth (all else equal) enables shared prosperity.

\n\n

But there is broad agreement that current measures of growth, such as GDP, are inadequate to the task of providing a suitable proxy to guide further growth. Whether devising improved measures that account for missing elements such as sustainability, equity, leisure time, or digital value, or constructing altogether new proxies (OECD's Better Life Index, for example), the conversation about how best to measure, and thus drive, equitable, regenerative, socially desirable growth is a rich field of debate.

\n","ledeExcerpt":"We define growth as the expansion of wealth in society; growth is about generating a \"a bigger pie\".\n\nAmidst debates over the merits of continued growth, we begin with the idea that *all else equal*, a society with growth, with more wealth, is preferable to one with less. Without growth, society becomes a zero-sum distributional game: anyone's gain is another's loss. Growth (all else equal) enables shared prosperity.\n\nBut there is broad agreement that current measures of growth, such as GDP, are inadequate to the task of providing a suitable proxy to guide further growth. Whether devising revised measures, such as Tyler Cowen's notion of wealth plus\" (GDP, plus measures of leisure time, household production, and environmental considerations), or constructing altogether new proxies (OECD's 'Better Life Index), the conversation about how best to measure, and thus drive, equitable, regenerative, socially desirable growth is a rich field of debate.","featured":true},{"slug":"labor-share","name":"Labor Share","id":"72743752","lede":"

Labor share refers to the share of national income (GDP) paid out in wages.

\n\n

Generally, national income is divided into labor share and capital share. Though recent research suggests land should be included as a third category, rather than included in capital share.

\n","ledeExcerpt":"Labor share refers to the share of national income (GDP) paid out in wages.\n\nGenerally, national income is divided into labor share and capital share. Though recent research suggests land should be included as a third category, rather than included in capital share.","featured":null}],"sources":[{"id":"69609432","lede":"This study of Finnish codetermination uses both a difference-in-difference model and a qualitative survey of Finnish workers. They find a small reduction in layoffs, moderate increase in survey-based job satisfaction, wage increases for the lowest earners, and small, positive, but tenuous effects on firm survival, productivity, and capital intensity. Interviews suggest that Finnish codetermination facilitates information sharing and cooperation rather than shifting power to labor.","link":"http://economics.mit.edu/files/21196","slug":"voice-at-work","kind":"","title":"Voice at Work","year":"2021-06-01","researchers":[{"id":"69609412","location":"","name":"Jarkko Harju","seoDescription":"","slug":"jarkko-harju"},{"id":"69609426","location":"","name":"Simon Jäger","seoDescription":"","slug":"simon-jager"},{"id":"69609429","location":"","name":"Benjamin Schoefer","seoDescription":"","slug":"benjamin-schoefer"}]}]}}