Is there a trade-off between efficiency and cooperativism? Evidence from Brazilian worker cooperatives

Abstract

Worker cooperatives seek both compliance with cooperative principles or “cooperativism” and economic efficiency. To fill the evidence gap on whether the two goals collide or coincide, we drawn on microdata including over 7,000 Brazilian cooperatives. Stochastic frontier models were used to estimate the relative level of efficiency and to relate it with cooperativism level measured as participatory decision-making and integration to cooperatives’ networks. Results showed that the former dimension of cooperativism presented a positive effect that dominated the negative effect of network integration. So that efficiency (weakly) increased with an index aggregating the two cooperativism’s dimensions. This was coherent with case studies attesting Brazilian cooperatives capacity to overcome threats to efficiency with organizational changes including the introduction of probation, dismissing and hiring of non-member workers, thus preserving core principles. Results were also consistent with theoretical studies which both argue that shirking and high transaction costs are the main threats to efficiency facing cooperatives and also that these are mitigatable by common principles fostering consensus and a participatory environment minimizing conflicts and disclosing private information. Government support to creation of cooperatives is recommendable as a poverty alleviation policy whether homogeneous social groups more prone to mutual trust are prioritized.