THREE ESSAYS ON THE ECONOMIC THEORY OF THE LABOR-MANAGED FIRM
Abstract
Since the 1950s when Yugoslavia, deviated from the sternly controlled communism of the Stalinist type began experimenting with labor management of its industrial enterprises, the performances of their firms have attracted economists' attention for quite a few studies. The classic studies of labor-managed economy are due to Ward, Domar and Vanek. In recent years, attention has been refocused on the behavior of the labor-managed firm versus the capitalist-managed firm. In this work, we attempt to explore the behavior of a labor-managed firm under a few specific environments, and compare the behavior of such a firm with that of a capitalist-managed firm. A simple utility-maximizing model of the labor-managed firm is presented in Chapter I, which assumes the membership of the firm is fixed, but the labor effort is not. The decision problem for workers on how much labor effort to provide is characterized as a cooperative game. In Chapter II, we look at the behavior of a labor-managed firm when the firm's environment is uncertain. We first analyze the behavior of a competitive labor-managed firm and second, we extend the analysis to a monopolistic firm in the case of quantity-setting. We demonstrate that a risk-averse labor-managed firm produces more output than a risk-neutral labor-managed firm. Introducing price uncertainty and assuming decreasing absolute risk aversion has a far greater impact on the behavior of a labor-managed firm than it has on the behavior of a capitalist-managed firm. In Chapter III, we focus on the advertising policy of a labor-managed firm. Since the advertising has an inherent growth-generating property, the advertising process of the firm is thus best analyzed in a dynamic framework. We demonstrate that, in contrast to the static case, both the Dorfman-Steiner theorem and Nerlove-Arrow theorem are modified for a labor-managed firm, in a dynamic setting.
Degree
Ph.D.
Subject Area
Economic theory
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