The Effect of Esop Benefits and Employee Participation on Effort and Cooperation

I develop a model in which the level of cooperation and effort supplied by an employee is determined by the level of benefits allocated to an employee's ESOP account and his individual merit pay. Specifically, it is hypothesized that as an employee receives greater benefits from the ESOP, and perceives his level of involvement at the firm is significant, the level of cooperation supplied rises. The implications of the model are contrasted with the efficiency wage hypothesis. These competing models are tested with a unique dataset of 684 employees at 28 firms with an ESOP. The findings are generally consistent with the efficiency wage hypothesis, and with some implications of the effort- cooperation theory