The River

APPROPRIATION FRICTION

Swedish wage earner funds and their limitations

Beyond growing calls for welfare expansion and a more progressive tax system, recent policy debates have begun to consider alternative models of firm ownership. Last year, the UK Labour party published a report outlining a path towards a more diverse set of ownership arrangements, including worker cooperatives and municipally owned service providers. The party also articulated an intention to transition ownership of up to 10% of shares to workers in large firms. More recently, the Bernie Sanders campaign announced a proposal for the formation of inclusive ownership funds, whereby large corporations contribute a portion of their stocks to an employee controlled fund. This comes in addition to Elizabeth Warren’s Accountable Capitalism Act, which calls for increased workers representation on company boards.

These recent proposals are distinctly reminiscent of programs put forward throughout the twentieth century, the most famous of which is Sweden’s 1976 Meidner Plan. In his 1992 book, Princeton politics professor JONAS PONTUSSON analyzes the origins of the plan, and the barriers to its successful implementation. He compares the movement for wage earner funds with that of co-determination, suggesting that the failure of the former has to do with the politics of legislation:

“In unfavorable political circumstances, it made sense for organized business to avoid major political confrontation and instead use post-legislative bargaining to define co-determination. By contrast, the Meidner Plan and subsequent wage-earner funds proposals left very little room for post-legislative bargaining. In other words, the co-determination offensive was a legislative success for the same reason that the implementation of new legislation became a disappointment for labor.

Organized business spent about as much on its advertising and media campaign against wage earner funds in 1982 as the five parliamentary parties spent on the election campaign that same year. But couldn’t the labor movement have devoted more resources to acquiring the expertise needed to influence industrial policy? The final lesson seems to be that when industrial policy, and investment policy more generally, fails to address wage earner’s immediate concerns, they are bound to become less supportive of further efforts to democratize investment decisions.”

Link to the book chapter, and link to an article in which Pontusson assesses the diluted version of the plan which was implemented in 1983.

• “The concept of a society which is built on moral values remains, in my view, too promising to be extinguished by inhuman market forces.” The disintegration of the Swedish model, in Rudolf Meidner’s words: Link. See also this interview with Meidner from 1998. Link.
• In the largest study of its kind, Joseph Blasi, Douglas Kruse and Dan Weltmann explore the impact of employee stock ownership plans (ESOP) on firm performance, concluding that “Privately held ESOP companies were only half as likely as non-ESOP firms to go bankrupt or close, had significantly higher post-adoption annual employment and sales growth, and demonstrated higher sales per employee.” Link.
• In 1987, political theorist Jon Elster argued that the plan’s failure was the result of a fundamental problem in its conception of justice, which would leave much of the real decision making capabilities in the hands of the union bureaucracy. Link.
• A report on Public-Common Partnerships, an “alternative institutional design that moves us beyond the overly simplistic binary of market/state.” Link.

New Researchers: RESOURCE CUTOFF

The effects of underfunding and course shutouts at public two-year colleges

Postdoc at University of Michigan SILVIA ROBLES examines the mechanisms by which funding disparities between institutions affect student outcomes. Comparing the University of California System and the California Community College system, which receive $32,368 and $13,021 per full-time student respectively, Robles finds that course oversubscription is a key driver of non-completion rates for students in the CCC system.

From the paper:

“The paper studies traditional community college students with a stated interest in either earning their associates degree or transferring to a four-year college. The reduced form results show that missing a waitlist cutoff significantly increases the probability of sitting out the term by 2.4 percentage points. That is, students who miss a cutoff are more likely to enroll in zero courses in the concurrent term, a phenomenon we call same-semester drop-out. This represents a 36% increase relative to the same-semester dropout rate of 6.6% among students who do not miss a waitlist cutoff. The evidence of large enrollment impacts from a relatively small friction, such as missing the waitlist cutoff for one section, demonstrates the potential for oversubscribed courses to meaningfully alter a student’s trajectory.”

Link to the paper, and link to Robles’s UMich page.

Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you’d like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

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• On the Phenomenal World, Amanda Page-Hoongrajok reviews James Crotty’s Keynes Against Capitalism. Link.
• We are seeking applications for JFI fellow Pascale Mevs’s upcoming seminar series titled “Social and Economic Mobility in NYC: Intersections of Research, Policy, and Practice.” Click here for more info, and here to apply.
• At VoxDev, Rachael Meager on the “average effect of microcredit.” Link.
• A small minimum wage round-up: the CBO released a report on the effects of the minimum wage for individual and family income, finding, overall, that minimum wage hikes will raise wages more than any job losses it may cause. Link. Arindrajit Dube comments on their findings, and relates them to his own (extensive and leading) research on the topic: “I think the job losses it projects are too large based on the weight of high quality evidence.” Link. An earlier general interest piece by Dube provides a helpful overview of the state of the evidence. Link. Finally, a new paper from the Philadelphia Fed finds that minimum wage increases reduce rental defaults substantially, with the caveat that the effect decreases over time as landlords increase rents. Link.
• Berk Özler at the World Bank covered our two-part post by Max Kasy on the politics of machine learning. Link to Özler’s discussion, and link to Max’s post on the blog.
• Marco Di Maggio, Ankit Kalda, and Vincent Yao on the student debt discharge from National Collegiate. Among the effects for borrowers with the debt relief shock: reduced indebtedness by 26%, less use of existing credit accounts, 11% decrease in likelihood of default on other accounts, increased geographic and employment mobility, and increased income. Link.
• From MIT, global spending on clean energy is at its lowest point in six years. Link. At Science, solar plus batteries is now cheaper than fossil power. Link.
• A new paper by Trevon Logan finds “a strong positive effect of local tax revenue on subsequent violence against black politicians. A dollar increase in per capita county taxes increases the likelihood of a violent attack by more than 25%. This provides the first quantitative evidence that political violence at Reconstruction’s end was related to black political efficacy. ” Link.
• In the 1970s, “leaders in the United Auto Workers and other unions formed coalitions with civil rights and environmental groups, and advocated federal policies that would reduce both pollution and unemployment. This article argues that the defeat of these efforts, and the political marginalization of full employment and other social-democratic goals in the 1980s, resulted in a narrower conception of environmental justice among many scholars and activists.” Link.
• An interview with anthropologist and architecture theorist Michał Murawski on Poland’s Palace of Culture and Science. Link.
• Francois de Soyres, Alen Mulabdic, and Michele Ruta examine the gains and losses for countries participating in Belt and Road Initiative projects. Link.
• On the spread of Hindu-Arabic numerals into European mathematics. “New economic complexity raised the need for a higher level of computing power, especially to solve calculations of interest and exchange rates. It is at this stage that merchant-bankers, who were already literate and numerate, realized that Hindu-Arabic numerals suited their needs better than Roman ones. Arithmetic with Hindu-Arabic numerals became part of the required training for merchant-bankers.” Link.

Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org