The Economic Differentiation of Producer-Consumer Households

Yoshihiro Maruyama and Tadashi Sonoda
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Yoshihiro Maruyama: University of Tsukuba
Tadashi Sonoda: Nagoya University

Chapter 4 in A Theory of the Producer-Consumer Household, 2011, pp 134-148 from Palgrave Macmillan

Abstract: Abstract As competitive markets develop for output and capital service, it is possible for the internal wage rate w* to exceed the market rate w in the producer-consumer households endowed with a high technological level or a large amount of capital service but a small number of family members as seen in equations (29.1)–(29.3) in section 2.2 of the second chapter. In this case, it will add to the well-being of their family members for their family firms to employ some labor from other households in which the internal wage rate falls short of the market rate. If they actually employ some labor from other households, the constraint on external employment for their family members ceases to be binding, so that it is possible for the family firm to employ as much labor as they want from other households as well as from their owner households. Thus, the family firms are able to organize their production activity without paying any regard to the consumption choice of their owner households and furthermore influence the consumption choice of the latter through the transfer of their residual profit. It appears that they assume their producer sovereignty, as it were, over the consumer sovereignty of their owner households. As they expand their employment of hired labor, they will be more like capitalist firms to expand the opportunities for wage employment and thereby help the market for labor to be more competitive.

Keywords: Family Firm; Market Rate; Indifference Curve; Wage Earning; Interior Equilibrium (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1057/9780230346680_4

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