Why Capital Hires Labor: A Bargaining Perspective

Gregory Dow

American Economic Review, 1993, vol. 83, issue 1, 118-34

Abstract: Organizational forms often serve as vehicles for the appropriation of quasi-rent. Capitalist firms typically emerge when production requires noncontractible investments in specific physical assets because worker control would divert quasi-rents away from ass et owners ex post. Conversely, labor-managed firms tend to emerge in niches requiring specialized human capital but general-purpose physi cal assets. A key result is that capitalist firms can persist in competitive markets even when labor-managed firms would yield a larg er total surplus. Copyright 1993 by American Economic Association.

Date: 1993
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