Document Type

Capstone Project

Publication Date

Summer 2016

Keywords

Stevenson Center, Income Inequality, Worker Cooperatives

Abstract

This project explores the relation between the magnitude of the cooperative sector and the degree of income inequality in a country. After a somewhat selective consideration of the possible linkages between the size of the cooperative sector and income inequality, and using Gini as the primary measure for income inequality and two proxies for the size of the cooperative sector, an empirical exploration is done in three ways. First, simple plots are used to judge the gross relation between Gini and each of the two proxies for the size of the cooperative sector. Both plots show a perceptible negative relation. Second, simple regressions of Gini are run on each measure of the cooperative sector to obtain quantitative correlates of the plots. The regression estimates show a highly significant negative relation between each proxy for the cooperative sector and Gini. Third, a more extended regression model is estimated after adding several control variables that have been suggested to affect income inequality. While estimated coefficients for the cooperative proxies continue to have negative signs in the extended model, their statistical significance is somewhat eroded relative to the conventional significance levels. Two other measures of income inequality show an even more perceptible negative association between income inequality and the cooperative sector size. While the multiple regression estimates indicate most control variables to lack statistical significance, mean years of school has a highly significant negative association with Gini, which is an informative outcome of the work. The estimates also show a significant positive association between both unemployment rate and natural resource endowment with the Gini coefficient. The main message from the study seems to be that, despite a low statistical significance in some of the regressions, there is considerable evidence of an inequality-attenuating role of the size of the cooperative sector in an economy.

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