Annals of Public and Cooperative Economics 89:1 2018
MERITOCRACY, EFFICIENCY, INCENTIVES AND VOTING
IN COOPERATIVE PRODUCTION: A SURVEY
Universidad de Alicante, Spain
Luis C. CORCH
Universidad Carlos III de Madrid, Spain
This paper surveys selectively several contributions to the understand-
ing of how cooperatives may cope with the interplay between meritocracy and efﬁciency
when public decisions are taking by voting and the supply of labor is freely decided
by each member. This outlines the main trade-off faced by cooperatives. In particular,
the degree of meritocracy is limited by three factors: (1) efﬁciency, because too much
meritocracy encourages too much work from the socially optimal point of view; (2) mer-
itocracy encourages sabotage; and (3) voting, because workers may prefer inefﬁcient
reward schemes as long as they are individually proﬁtable.
Keywords: Cooperative production, growth, meritocracy, efﬁciency, incentives, voting
JEL classiﬁcation: D2, D9, O4
Mainstream economic theory assumes that ﬁrms are owned by shareholders who are
interested in maximizing proﬁts.
This covers a fair amount of ground but it leaves out-
side cooperative production in which a group of people (say, workers) owns a production
facility (a technology, a plot of land) and a certain input (labor) which has alternative
uses (another facility, leisure, etc.). Inputs and technology produce output. The reader
may think of a cooperative owning a ﬂat and using labor to produce teaching services.
This paper is dedicated to Joaquim Silvestre from whom we learnt so much, especially
relating to this topic. The ﬁrst author acknowledges ﬁnancial support from ECO2014 53051,
SGR2014-515. The second author acknowledges ﬁnancial support from ECO2014-57442-P, and
ﬁnancial support from the Ministerio Econom
ıa y Competitividad (Spain), grants S2015/HUM-
3444 and MDM 2014-0431. E-mail: Carmen.email@example.com
Despite the fact that proﬁt maximization agrees exactly with shareholders’ interests only
in special cases, like large economies, see Hart (1979).
In fact the work of Roemer and Silvestre on this topic was motivated by their membership
to a wine cooperative in Davis.
2018 The Authors
Annals of Public and Cooperative Economics
2018 CIRIEC. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford
OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA