Employment and Wages over the Business Cycle in Worker‐Owned Firms: Evidence from Spain *

This article compares worker‐owned firms and mainstream capital‐owned enterprises over the business cycle. Specifically, I study whether conventional employees in worker‐owned firms enjoy greater employment stability than similar workers in traditional enterprises over the business cycle, and investigate whether this stability is associated with greater volatility of working‐time or wages. Unlike the literature that has compared partners of worker‐owned firms to wage‐earners of mainstream firms, I compare wage‐earners across both type of organizations along the three margins of adjustment. The econometric analysis is based on rich Spanish administrative data and panel data methods to account for composition differences between the two types of organizations. The results show that worker‐owned firms offer higher job security because they do not adjust employment levels over the business cycle as much as mainstream enterprises. Wages and working‐time, instead, are equally responsive across the two types of firms. The findings can be rationalized by the presence of similar labour regulations and differences in the nature of the two type of organizations. Namely, both types of firms are constrained by regulations, such as the national Labor Code and collective bargaining, on the adjustments they can impose on wages and working‐time. However, the social structure of worker‐owned firms mitigates employment volatility in these organizations.