Capital as common-pool resource: Horizon problem, financial sustainability and reserves in worker cooperatives

In most countries, self-financed accumulation of capital in cooperative enterprises makes substantial (but variable) use of indivisible reserves, which can be understood as common-pool capital resources, since they are characterized by rivalry and non-excludability in utilization among the members of the cooperative. The paper is structured in two main parts. The first part deals with dynamic inefficiency in investments and the problem of undercapitalization due to the members’ truncated temporal horizon in worker cooperatives. The conjugation of different types of reserves, divisible and indivisible, is envisaged as possible solution to under-investment. In the second part, a new layered system of reserve funds, both divisible and indivisible, is discussed, showing that each different layer has distinctive functions in facing the stability vs performance trade-off: stability and strength of patrimony are adjudicated to the indivisible layers, while efficient allocation of reinvested funds and members’ financial involvement require divisible reserve layers.