Income distribution and firm formation |
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Authors: | Elaine Bennett Myrna Wooders |
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Institution: | 1. School of Management, State University of New York, Buffalo, New York 14214, USA;2. Department of Economics, State University of New York, Stony Brook, New York 11794, USA |
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Abstract: | This paper investigates equilibria associated with alternative income-distribution schemes in economies where firm formation is endogenous. The income realizable by a firm depends upon the membership of the firm. An entrepreneurial equilibrium, where agents form and/or join firms so as to maximize their individual incomes, has firm structures that maximize aggregate income but does not have good existence properties. Two alternative equilibrium concepts that have better existence properties than the entrepreneurial equilibrium but weaker optimality properties are considered. The results are applied to the debate on the optimality of average-income-per-worker maximization within a market-socialist firm. |
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