A Growth Model for a Tenured-Labor-Managed Firm

Andre Sapir

The Quarterly Journal of Economics, 1980, vol. 95, issue 3, 387-402

Abstract: The theory of the labor-managed firm is a recent addition to the economic literature on organization. Analyses of the behavior of workers' self-managed firms have produced two versions of the theory. The present paper is primarily concerned with the employment decisions of labor-managed firms, which are analyzed within the framework of a new model drawing upon both versions of the existing theory. We present a growth model for a firm characterized by the division of labor between tenured and nontenured workers, whose aim is the intertemporal maximization of the net income per tenured worker. Using Pontryagin's Maximum Principle, we obtain the optimality conditions, the transition path, and the steady state for the model. We also analyze a series of policy alternatives. Some references are made to the Yugoslav economy.

Date: 1980
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