On the theory of the competitive labor-managed firm under price uncertainty

The short-run behavior of a labor-managed firm under competitive assumptions and price uncertainty is analyzed assuming risk aversion. It is compared with its behavior under certainty and the behavior of a capitalist-managed firm under price uncertainty. It is shown that a risk-averse labor-managed firm employs more labor than a risk-neutral labor-managed firm. Generally, uncertainty is seen to have greater impact on the behavior of a labor-managed firm than on the behavior of a capitalist-managed firm. Except under constant risk aversion, the behavior of a labor-managed firm under price uncertainty is less predictable than that of a capitalist-managed firm.     

On the labor-managed firm in a competitive environment

A risk-neutral median voter in a labor-managed firm (LMF) facing an increase in the demand for its product will prefer to maintain employment and secure his job to the prospect of a higher dividend accompanied by the risk of unemployment. It is argued that LMFs with fixed employment and output will lose out in competition with flexible-output profit maximizing firms. Partnerships with a small membership in high-human-capital industries will be most likely to survive in a competitive environment.     

Short-run efficiency in the labor-managed firm

This paper examines the short-run comparative statics of resource allocation in a labor-managed firm when workers are free to adjust work hours but not membership in a competitive market environment. It is found that the workers might encounter difficulties in attaining their utility-maximizing choices of work hours, but with the acceptance of a simple collective-choice decision rule, each worker's optimum becomes the Pareto-optimum.     

The effect of production uncertainty on the labor-managed firm

The effects of production uncertainty on the behavior of the labor-managed, cooperative firm are examined and it is shown that they generally differ from the case of certainty and the case of the entrepreneurial, profit-maximizing firm. In particular, it is shown that the risk-averse (risk-seeking) cooperative will have a larger (smaller) ratio of labor to nonlabor input employed in production than the risk-neutral cooperative.     

The theory of the labor-managed firm from the membership's perspective with implications for marshallian industry supply

The partial-equilibrium literature on labor-managed (L-M) firms argues that the property-rights structure inhibits economic efficiency and induces perverse responses to price parameters in the short run. But recent general-equilibrium literature demonstrates equivalence of equilibria between L-M and capitalist market economies with the relevant welfare results therefore applying to the L-M economy. Once the L-M firm's maximand is modified to incorporate members' property rights, the short-run industry supply curves of the two economics, under quasi-market conditions consistent with recent Yugoslav reforms, are seen to be equivalent. Hence, the property-rights structure in the L-M economy is compatible with efficiency and normal short-run price responses.     

Towards an economic theory of the multiproduct firm

This paper outlines a theory of the multiproduct firm. Important building blocks include excess capacity and its creation, market imperfections, and the peculiarities of organizational knowledge, including its fungible and tacit character. A framework is adopted in which profit seeking firms are seen to diversify in order to avoid the high transactions costs associated with using various markets to trade the services of various specialized assets. Neoclassical explanations of the multiproduct firm are shown to be seriously deficient.     

A two-period model of the competitive socialist labor-managed firm

This paper investigates the role of price expectations in the short-run supply response of the competitive socialist labor-managed firm. The insights gained from the analysis of the two-period model presented in this paper are used to clarify the role of price expectations in the literature on labor-managed firms. It is found that the type of price expectation assumption, made implicitly or explicitly, affects the slope of the firm's short-run supply curve.     

Management contribution and the allocation of time in a labor-managed firm

The problem of time allocation in a labor-managed firm is considered under a technology specification in which the role of management in the production process is different from that of “ordinary” members. Two allocation schemes are discussed, the egalitarian and the Nash equilibrium. It is shown that in the model discussed the Nash solution brings about an output level that is lower than the Pareto-optimal output level. If the manager seeks employment opportunities outside the cooperative that reflect his success as manager, he increases his time input so that the output of the cooperative and the “ordinary” members' utility levels increase.     

Budget constraint of a firm and economic theory

Summary Firms in reality are subject to budget constraints which general equilibrium theorists have paid little attention. Using Morishima (1950, 1992) model, this paper deals with firms that are subject to budgets pertaining to sales and investment decisions, and proves the existence of a general equilibrium. We show that an economy with firms subject to budgets does not necessarily satisfy the efficiency proposition, and clarify how the total profit maximum condition in the Arrow-Debreu (1954) type economy ensures an efficiency in a limited dynamic sense.The author is grateful to Professors J. Iritani, H. Nagatani, and K. Urai who gave useful comments on occasions of Saturday Workshop on Economic Theory and Mathematics. He is also grateful to Professor M. Kaneko for his useful comments on an earlier version of the paper Kuga (1993), to which this article is closely related.     

On the opportunism-independent theory of the firm

Previous developments in the opportunism-independent theoryof the firm are either restricted to special cases or are derivedfrom the capabilities or resource-based perspective. However,a more general opportunism-independent approach can be developed,based on the work of Demsetz and Coase, which is neverthelesscontractual in nature. This depends on ‘direction’,that is, deriving economic value by permitting one set of actorsto direct the activities of another, and of non-human factorsof production. Direction helps to explain not only firm boundariesand organisation, but also the existence of firms, without appealingto opportunism or moral hazard. The paper also considers theextent to which it is meaningful to speak of ‘contractual’theories in the absence of opportunism, and whether this analysiscan be extended beyond the employment contract to encompassownership of assets by the firm.     

David Hume and Irving Fisher on the quantity theory of money in the long run and the short run

The Modern variant of internationalization of Swedish economics began at the end of the nineteenth century will Wicksell as the first clearly international economist. By that time foreign influences came especially from the German-language area. We concentrate, however, on the period after the Second World war. Our statistics is based oninter alia, the Scandinagian Journal of Economics. English has gradually become the most important language in citations and Swedish dissertations. American influences have become large, and the Swedish ideal of research is very similar to the American one. The evolution is, however, not unequivocal.     

Efficiency,incentives, and individual labor supply in the labor-managed firm

Parallels are drawn between the approach to the theory of individual labor supply used by Sen (“Labor Allocation in a Co-operative Enterprise.” Rev. Econ. Stud.33: 361–371, Oct. 1966) and approaches of more recent contributions. The paper considers questions of comparative statics in a general model and attempts to distinguish between behavior in labor-managed firms and profit-maximizing firms. Diagrammatic analysis is used for a simple case where income effects are absent. Questions of efficiency and comparative statics are studied in the short run (membership fixed) and in the medium term (membership variable). Finally an incentive scheme to promote efficiency is described.     

Intra- and international risk-sharing in the short run and the long run

We investigate empirically how industrialized countries and US states share consumption risk at horizons between 1 and 30 years. US federal states share about 50% of their permanent idiosyncratic risk through cross-state capital income flows. While insurance against transitory fluctuations in output is virtually complete, OECD countries do not share any of their permanent idiosyncratic risk. Our results suggest that purely transaction cost based theories cannot explain the home bias, since the potential welfare gains from insurance against permanent shocks would by far outweigh that of insuring against transitory variation. We conclude that permanent and transitory shocks constitute two qualitatively different kinds of risk and that various forms of endogenous market incompleteness may render permanent shocks a lot harder to insure, in particular at the international level.     

International risk‐sharing in the short run and in the long run

Abstract International risk‐sharing has far‐reaching implications both for economic policy and for basic research in economics. When countries do not share consumption risk, individuals experience consumption fluctuations that are undesirable and possibly unnecessary. We investigate bilateral risk‐sharing at short vs. long horizons. We find substantial cross‐country consumption correlations at trend and business‐cycle frequencies. Correlations are particularly high within Europe. Prior research focused on first‐difference correlations, which are typically quite low. We argue that this reflects measurement error. At all horizons, we find that consumption correlations are not significantly different from output correlations, implying a lack of deliberate consumption risk‐sharing.     

Long run determinants and short run dynamics of inflation in Tunisia

The essential idea of this study is to analyse the origins of inflation at short and long runs in Tunisia relying on annual data during the period 1962 to 2003. We also suggest a model that has a structure determined by monetary and structural factors, and estimated by Johansen's cointegration technique. The empirical results show that inflation is explained by mixed factors: monetary ones such as money supply, the interest rate and the real effective exchange rate; and structural ones like the nominal average annual wage rate, the import prices and the real output. The analysis aims at pointing out the long run determinants of inflation and studying its short run dynamics.     

Optimal risk shifting vs efficient employment in Illyria: The labor-managed firm under asymmetric information

Using an optimal contract framework, the recent literature showed how labor-managed firms (LMFs) can reach efficient employment, internal risk sharing, and risk shifting to outside investors if all information is public. This paper analyzes the LMF under asymmetric information between members and investors. Sections 2 and 3 explore one-period arrangements in a way which parallels the recent work on optimal wage-employment contracts in capitalist firms. Our main result is that, contrary to the Coase theorem, the two specifications of property rights entail different allocations of risk and employment. Section 4 shows how long-term arrangements ease the conflict between optimal employment and risk shifting.