Worker Cooperatives, Executive Pay Caps, and Inequality

Cel

Rising concentration of income and wealth in advanced economies has triggered calls for more redistribution and regulation. Yet implementation of these systemwide correctives has been limited, partly because of political resistance from organized interests. In response, some political forces have turned to firm-level remedies, addressing inequality at the point where income is created. These include limits on the ratio of top executive compensation to worker wages (pay caps), and support for worker cooperatives (coops). However, formal and quantitative assessments of the inequality-reduction benefits of these policies, or of their impact on macroeconomic outcomes, are either inexistent (for pay caps) or outdated (for coops). Building on methodological foundations established in Caselli (2025, pay caps) and Brzustowski and Caselli (2025, coops), CompCoopCaps seeks to fill these gaps. Track 1 will evaluate the quantitative impact of pay caps in economies featuring frictions such as: monopsonistic labour markets; managers motivated by non-pecuniary benefits of control; and managerial rent extraction. In all these cases, there are reasons to conjecture that pay caps may not only reduce top-income concentration but also ameliorate the respective frictions – making the policy less costly in terms of aggregate output than it would be in a frictionless economy. Track 2 will produce similar evaluations for economies with coops. In a micro-to-macro progression, it will begin with a partial-equilibrium analysis of the comparative productivity properties of coops and conventional firms; which will then be embedded in a general equilibrium model of organizational-form choice by firm funders with heterogeneous abilities; to be then further extended to a search and matching framework for the evaluation of the comparative risk properties of coops, and finally to a full dynamic framework which traces implications for growth and inequality in the long-run.