A new study published by ECLAC concludes that the productivity of social economy companies may be higher than that of conventional companies

Within the framework of the project “Productive development and spatial heterogeneity in Latin America: institutions and capacity development in the programming and implementation of regional productive policies”, supported and financed by the European Union, the Economic Commission for Latin America and the Caribbean (ECLAC ) published this month the document “Comparative Productivity of Social Economy Companies in Chile”.

The study, which analyzes the productivity of different types of companies in the social economy in Chile (non-profit companies, cooperatives and certified companies), and compares them with those of conventional for-profit companies, seeks to determine if these categories have a level of total factor productivity higher or lower than that of traditional companies.

The study carries out a historical and conceptual review of both the social and solidarity economy, differentiating these definitions in terms of what type of organizations are part of each one. In Chile, meanwhile, although there is no legal definition of the social economy sector, it differs, for example, from the community economy, because the former is framed in organizations and companies whose main activity is economic and focuses in commercial activities and in the sale of goods and services.

The document evaluates the comparative productivity, between 2005 and 2020, of non-profit companies (foundations and associations of individuals), cooperatives, and certified companies (B companies), that is, those where the company is guided by values ​​of human development.

According to data from the Internal Revenue Service (SII), in 2005 social economy companies represented 0.24% of the number of companies, while in 2020 this figure rose to 0.8%, tripling their participation in the business mass national. Likewise, with regard to formal employment, the participation of this type of company increased from 0.8% in 2005 to 2.4% in 2020.

According to what was explained in the study, 82% of the social economy companies are non-profit and also represent 85% of employment in the social economy sector.

When making the comparison, using production functions that allow the consideration of the different technologies used by each type of company, and taking into account variables of various kinds that influence the level of production such as capital, the number of employees, the territory where they are located and the sector of economic activity, it is found that certified companies or B companies are significantly more productive than traditional ones, that non-profit companies have a productivity equal to or greater than that of a conventional company, and that cooperatives are at a lower level of productivity compared to conventional companies.

The lower productivity of cooperatives is also documented in the specialized literature. This fact makes it necessary, in the understanding that cooperatives represent a desirable business model not because of productivity, but because they allow greater employment stability in the face of economic crises, strengthen the agency of workers, the ability to make strategic decisions, work collaboratively, allowing the creation of communities and the growth of the sense of belonging, then productivity becomes a factor to improve if what is sought is the stability and growth of the sector.