Some reflections on self-management, social choice, and reform in eastern Europe

East European reformers, in rejecting the use of self-management, base their judgment on the problems of Yugoslav self-management and a view that self-management and private ownership are incompatible. Viable systems of self-management can be devised, so the case hinges on the relative performance of self-managed and private firms. Using a sample of cooperatives and private firms, we compare performance in the structure of pay and employment, relative productivity, and growth. Labor management skews employment in favor of median voters, but does not harm productivity or growth, suggesting that reformers should not instantly dismiss self-management.