Widely differing theoretical expectations exist concerning the economic performance of labor-managed firms or producer cooperatives (PCs). While a good number of theoretical studies of these firms by economists have been undertaken, there remain considerable gaps in the empirical record. This is especially true in the case of American PCs. In general, theoretical controversies have not been tempered by enough empirical analysis. While some expect good performance from PCs, others are much less sanguine. This study compares the economic performance of a group of eight worker-owned producer co-op plants with that of eight conventional mills in the Pacific Northwest softwood plywood industry. The purpose is to test the validity of several propositions that are typically maintained in the analysis of PCs suggesting that this type of organization basically lacks the incentive to utilize labor inputs efficiently, and is therefore less productive when compared to conventionally organized producing units. Using secondary data, pooled time-series cross-section equations are estimated. Results indicate that growth in annual output per employee per year is 18 percent greater in the co-ops than in their conventional counterparts. The study provides strong evidence that the two groups of plants differ significantly in their behavior. The major conclusion that emerges is that worker-owned co-ops are a viable and productive form of economic organization that utilize labor inputs efficiently and in doing so can achieve higher worker productivity than their conventional counterparts. In a public policy context, government support of employee ownership and establishment of worker-owned co-ops is viewed as a viable policy option to plant closings.