Labor-managed Firm Research Articles

Inventories and Mixed Duopoly with State-Owned and Labor-Managed Firms

This paper considers a two-period mixed market model in which a state-owned firm and a labor-managed firm are allowed to hold inventories as a strategic device. The paper then shows that the equilibrium in the second period occurs at the Stackelberg point where the state-owned firm is the leader.

MODELING PROPORTIONS: RANDOM EFFECTS MODELS OF UK FIRM ENTRY

A long-standing issue in industrial economics is the understanding of the relative prevalence of labor-managed firms (LMFs) and capitalist firms across industries. In proportionate terms, LMF entry tends to be highly concentrated in particular industries. We provide empirical evidence on this by modeling the proportions of industry entrants that are LMFs, using a panel of UK manufacturing industries. Random effects proportions models indicate the role and importance of risk and capital requirements as potential deterrents to LMF entry.

Most-Favoured-Customer Pricing and Labour-Managed Oligopoly

This paper considers a price-setting oligopoly model in which labour-managed firms can offer retroactive most-favoured-customer policies as a strategic instrument. The purpose of the paper is to present the equilibrium of the labour-managed oligopoly model with most-favoured-customer pricing and show the effects of the most-favoured-customer policy.

Attraktivität der eingetragenen Genossenschaft für Existenzgründer

Zusammenfassung Durch die Novellierung des Genossenschaftsgesetzes ist die Rechtsform der eG attraktiver geworden und die Gründung von Genossenschaften wurde deutlich erleichtert. Dies gilt auch für die Gründung von Produktivgenossenschaften, also die Existenzgründungen in Kleingruppen. Dieser Attraktivitätsgewinn ist in erster Linie auf die Reduzierung der Mindestanzahl an Mitgliedern zurückzuführen, aber auch die Neuregelungen zu Vorstand und Aufsichtsrat haben sich ausgewirkt.

Meaningful Work and Market Socialism Revisited

Abstract If the economy consisted of labor-managed firms, so the workplace is democratic, and in addition the benefits and burdens of economic cooperation were shared equitably and the economy operated efficiently, might there still be a morally compelling case for further intervention into economic arrangements so as to increase the degree to which people gain meaningful or satisfying work? ‘No!’, answers a 1987 essay by the author. This comment argues against that judgment, on the ground that morally required perfectionism or paternalism or simple fairness to the worse off might demand such intervention. It is plausible to hold the good life includes meaningful work, and that what we fundamentally owe one another is a fair distribution of good quality of life. However, this comment also takes issue with Russell Keats’s argument against Arneson in his essay in this issue of this journal.

WORKERS' ENTERPRISES AND THE TASTE FOR PRODUCTION: THE ARTS, SPORT AND OTHER CASES

ABSTRACTThis paper shows that the standard result according to which labour‐managed (LM) firms produce a lower amount of output, as compared with profit‐maximizing firms, is reversed if production per se gives utility and the workers' membership of LM firms is set before market decisions. Under the same hypotheses, the LM firms set a higher product quality than the profit‐oriented ones, ceteris paribus. The considered hypotheses are appropriate in several sectors, but they are particularly relevant in the case of the performing arts.

Gramsci and the Labor-Managed Firm

According to Antonio Gramsci, workers' councils were transitional institutions expected to carry on business in a market economy and thereby prepare the ground for the revolution. However, upon seizing power, workers were expected to establish a centrally planned system and, hence, to renounce autonomous firm management. Finding fault with this approach, the author upholds modern labor management theory, in which Vanek's LMF-type firms are looked upon as socialist firms operating in a market economy.

The Limits of Equality: Insights from the Israeli Kibbutz*

What limits the capacity of society to redistribute? What determines the structure of compensation in organizations striving for income equality? This paper addresses these questions by investigating the economic and sociological forces underlying the persistence of the Israeli kibbutzim, communities based on the principle of income equality. To do this, I exploit newly assembled data on kibbutzim and a financial crisis in the late 1980s that affected them differentially. The main findings are that (1) productive individuals are the most likely to exit and a kibbutz's wealth serves as a lock-in device that increases the value of staying; (2) higher wealth reduces exit and supports a high degree of income equality; and (3) ideology facilitates income equality. Using a simple model, I show that these findings are consistent with a view of the kibbutz as providing optimal insurance when members have the option of leaving. More generally, these findings contribute to an understanding of how mobility limits redistribution, and to an understanding of the determinants of the sharing rule in other types of organizations, such as professional partnerships, cooperatives, and labor-managed firms.

Strategic Commitment and International Mixed Competition with Domestic State-owned and Foreign Labor-managed Firms

Strategic Commitment and International Mixed Competition with Domestic State-owned and Foreign Labor-managed Firms, 10.1628/001522108X397679, Jahrgang 64 (2008) / Heft 4, 0015-2218 (1614-0974), Public Finance Analysis

Cooperative and noncooperative R&D with spillovers: The case of labor-managed firms

This research focuses on the behavior of not-for-profit enterprises. In particular, using a familiar model of cost-reducing R&D with spillovers, we examine strategic interactions between labor-managed firms in a duopoly. Research spillovers have not been previously considered in the context of labor-managed firms. Among four market scenarios involving (i) competition in research and production; (ii) cooperation in research and production; (iii and iv) competition or cooperation in research and the reverse in production, our results show that research is greatest under full cooperation, while output is greatest under full competition. Output and R&D are the lowest in the case when firms compete in research, but form a production cartel. The degree of research spillovers has a crucial bearing upon these rankings. Some of these results differ from those for profit-maximizing firms. The effects of changes in research spillovers on employment (output) are shown to depend upon the nature of the underlying production technology. Policy implications are discussed.

On the Role of Capital in “Capitalist” and in Labor-Managed Firms

This article outlines the “fundamental myth” about the structure of property rights in a capitalist economy, namely the idea that being the residual claimant in a productive opportunity is part of a bundle of property rights known as the “ownership of the firm.” Residual claimancy is contractually determined so there is no such “ownership.” The fundamental myth exposes a basic fallacy in capital theory that has hitherto escaped attention in the capital theory debates.

Workers’ enterprises are not perverse: differential oligopoly games with sticky price

We take a differential game approach to study the dynamic behaviour of labour managed (LM) firms, in the presence of price stickiness. We find that the oligopoly market populated by LM firms reaches the same steady state equilibrium allocation as the oligopoly populated by profit-maximising (PM) firms, provided that the LM membership and the PM labour force are set before the market game starts. The conclusion holds under both the open-loop solution and the closed-loop solution. The result confirms the point made by Sertel (Eur Econ Rev 31:1619–1625, 1987) in a static framework.

Theoretical Postulations on Organization Democracy

In previous research the author conducted a narrative examination of the literature on labor-managed firms to discover the nature of “organization democracy.” The result was a broad conceptual framework. This article builds on the framework by offering two theoretical postulations. First, it offers a substantive theoretical postulation that organization democracy is a conflation of political visions that can be represented by Mannheim’s (1936) four utopian images of anarchism, liberalism, conservatism, and radicalism. Second, it offers a formal theoretical postulation that organization democracy is an additional form of legitimate authority to add to Weber’s (1947, 1978) typology. The author proposes “rational-collective” legitimate authority as the fourth form and ends with a two-dimensional representation of the four types of legitimate authority.

Entry, exit, and the business cycle: Are cooperatives different?

The paper revisits the question of why there are so few labor-managed firms in capitalist economies. Using new data on France, we present a comparative empirical examination of entry and exit among worker cooperatives and conventional firms. We estimate identical equations explaining annual entry and exit flows for the two groups of firms and test for the equality of the coefficients estimated. We find that cooperative creations are more countercyclical, but the effect of the business cycle on exit is the same for both groups of firms. Other factors influencing entry include organizational density and suggest that support structures are important for cooperative entrepreneurship. Journal of Comparative Economics 34 (2) (2006) 295–316.

The effect of employee stock ownership on wage and employment bargaining

When workers can bargain over wages and employment, standard insider–outsider models predict underemployment if the number of insiders is small and overemployment if the number of insiders is large. For instance, a union will restrict employment growth in an expanding firm and oppose layoffs in a contracting firm. This paper shows that employee stock ownership can solve both problems and that the necessary ownership share is often relatively small. The results are compared with related results in the literatures on profit-sharing and labor-managed firms. Journal of Comparative Economics 33 (3) (2005) 565–583.

The Effect of Employee Stock Ownership on Wage and Employment Bargaining

When workers can bargain over wages and employment, standard insider-outsider models predict underemployment if the number of insiders is small and overemployment if the number of insiders is large. For instance, a union will restrict employment growth in an expanding firm and oppose layoffs in a contracting firm. This paper shows that employee stock ownership can solve both problems and that the necessary ownership share is often relatively small. The results are compared with related results in the literatures on profit-sharing and labor-managed firms.

The Role of Capital in 'Capitalist' and in Labor-Managed Firms

This paper is divided into two parts. The first part outlines the fundamental myth about the structure of property rights in a capitalist economy, namely the idea that being the residual claimant in a productive opportunity is part of a bundle of property rights known variously as ownership of the firm, ownership of the means of production, or, to economists, ownership of the production set (or function). Residual claimancy is contractually determined and there is no ownership that legally determines how future contracts are made. The fundamental myth leads to a basic fallacy in capital theory and in corporate finance theory. Understanding the myth also allows us to clarify the role of capital in the system misnamed capitalism. The underlying theme is that the key institutional feature of capitalism is not the role of capital or the private ownership of the means of production but the employment contract for the renting of human beings. In the second part, slightly more formal models are first used to analyze the fallacies in capital theory and corporate finance theory. Then attention is turned to a right-by-right comparison between the structure of rights in a conventional corporation and in a democratic firm (a labor-managed firm). Of key importance is the role of the internal capital accounts in a democratic firm.

Call for Papers: Advances in the Economic Analysis fo Participatory and Labor-Managed Firms, Volume 9

Call for Papers: Advances in the Economic Analysis fo Participatory and Labor-Managed Firms, Volume 9

Wage-setting Mechanisms in the Russian Industry

The paper examines a specific model of wage-setting evolved in Russia under transition. Using new survey data author reveals paradoxical characteristics of wage-setting mechanisms at Russian industrial enterprises: very high union and collective agreement coverage; nearly unilateral control of managers over wage determination; close correlation between earnings and enterprises' performance; voluntary utilization of wage standards established by the state. The special section explores effects of fulfilling a new provision stipulated for by the recently adopted Labor Code to raise minimum wage to the subsistence minimum level. The author concludes that wage-setting in the Russian labor market is at odds with a textbook competitive model and poorly fits into many other sophisticated theoretical schemes (such as labor-managed firms, bargaining models etc.).

Random pricing by labor-managed firms in markets with imperfect consumer information

Price-setting oligopolists have market power if consumers have imperfect information. This paper compares the behavior of firms that maximize profits to those that maximize profit per worker in such an oligopoly. We consider a mixed strategy Nash equilibrium in which firms choose prices by random processes, and the number of firms is determined by free entry. Oligopolies composed only of profit-per-worker maximizing firms price higher on average. Firms in mixed oligopolies price higher the relatively more profit-per-worker firms are in the group, but profit-per-worker maximizing firms price lower than profit maximizing firms.