Cooperatives and Market Failure: Workers’ Cooperatives and System Mismatch

Cooperatives function in market economies, but they are not always served well by markets. Workers’ cooperatives avoid use of the labor market by definition, but they encounter forms of market failure and system mismatch in equity markets. Economic theory of the labor-managed firm and the historical development of the Mondragón system of financing cooperatives provide insight into these problems. This article argues for new strategies to assist capital formation in cooperatives.