Equality under threat by the talented: evidence from worker-managed firms

Does workplace democracy engender greater pay equality? Are high-ability individuals more likely to quit egalitarian organisational regimes? The paper revisits this long-standing issue by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The analysis is based on novel administrative data sources, which allow constructing a simple ordinal measure of the workers′ ability type. The paper's key findings are that (1) worker-managed firms have a more compressed compensation structure than conventional firms; and (2) high-ability members are more likely than other members to exit.