Cooperative labor allocation under uncertainty

Understanding the allocation of labor between collective and private production activities within cooperatives has been an issue of interest for both economists and policy makers. This paper examines the effects of uncertainty and risk aversion on a member's allocation of labor. A member's labor response to a change in a policy parameter is decomposed into three components: the mean, variance and wealth effects. The impacts of uncertainty and risk aversion, captured in the variance and wealth effects, are generally found to work in opposition to the mean effect and in some circumstances reverse the outcome known to prevail under certainty.