The Economics of Workers’ Enterprises

Paul R. Kleindorfer and Murat Sertel
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Paul R. Kleindorfer: University of Pennsylvania

Chapter 5 in Economics in a Changing World, 1993, pp 80-99 from Palgrave Macmillan

Abstract: Abstract The economics of labour management and producer cooperatives began in earnest with Ward’s celebrated paper in 1958 (Ward, 1958). The Wardian theory of the labour-managed firm (LMF) was extended in the early contributions of Domar (1966), Vanek (1970) and Meade (1972) to a general theory of labour-managed industries and economies. A basic characteristic of this literature was the maintained assumption that workers in the LMF would maximize dividend per worker-member, defined as the value added per worker. Thus, the LMF chooses inputs in the long and short run so as to maximize 1 v = V L = p Y − r K L = p F ( K , L ) − r K L $$v = \frac{V}{L} = \frac{{pY - rK}}{L} = \frac{{pF(K,L) - rK}}{L}$$ where V is value added, L is labour, K is capital and p is the market price for the firm’s output Y = F(K, L), r is the rental price of capital, and F is the firm’s production function which is assumed to exhibit positive and decreasing marginal products of capital (∂F/∂K) and labour (∂F/∂L)

Date: 1993
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DOI: 10.1007/978-1-349-22988-8_5

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