Labor-Management and Codetermination in Regulated Monopolies.
Abstract
This paper has two central themes: the comparative analysis of alternative institutional forms of labor influence in monopolies; and the design of regulatory mechanisms for improving the welfare efficiency of such firms. Concerning the comparative analysis of different firm types, labor-managed and codetermined firms have two basic problems: underemployment and perverse short-run adjustment to price changes of output and long-run inputs. In addition, labor-managed firms may undervalue investment projects and retained earnings relative to efficient market levels. On the positive side, being the partial recipient of residual profits in the firm improves labor productivity. The policy implications of this analysis are simply stated. If overemployment or low productivity are central problems, then increasing labor's influence in the firm, with concommitant incentives, is a possible cure. Just how well this cure is likely to work relative to a traditional capitalist-managed firm depends, inter alia, on the income elasticity of workers' effort (how well they will respond to productivity incentives) and the price elasticity of demand (how strongly the market reinforces increases in output resulting from improved productivity). Regarding regulation, lump-sum taxes, and income and price regulation can improve the efficiency of labor-managed and codetermined firms. More direct regulation is specifying acceptable levels of capital input and employment will naturally also improve efficiency, gross of the transaction costs involved.
Document Details
- Document Type
- Technical Report
- Publication Date
- Oct 01, 1979
- Accession Number
- ADA086911
Entities
People
- Murat R. Sertel
- Paul R. Kleindorfer