The Labor-Managed Firm
Theoretical Foundations

This book uses economic theory to argue that labor-managed firms are rare due to market failures rather than any inherent organizational defects.

Gregory K. Dow (Author)

9781107589650, Cambridge University Press

Paperback / softback, published 16 May 2019

429 pages
23 x 15.2 x 2.3 cm, 1 kg

'This is a lovely book, and one we have needed for several decades. It offers a genuinely novel perspective on the theory of labor-managed firms, informed at every step by a careful attention to empirical findings and by the institutional makeup of real-world worker cooperatives and employee-owned firms. Dow has spent some thirty years thinking about these issues, and brings his work together in an impressive whole. It will redefine the theoretical and empirical research agendas, as well as providing an invaluable text in support of a postgraduate course on economic democracy.' Virginie Pérotin, University of Leeds

In previous work, Gregory K. Dow created a broad and accessible overview of worker-controlled firms. In his new book, The Labor-Managed Firm: Theoretical Foundations, Dow provides the formal models that underpinned his earlier work, while developing promising new directions for economic research. Emphasizing that capital is alienable while labor is inalienable, Dow shows how this distinction, together with market imperfections, explains the rarity of labor-managed firms. This book uses modern microeconomics, exploits up-to-date empirical research, and constructs a unified theory that accounts for many facts about the behavior, performance, and design of labor-managed firms. With a large number of entirely new chapters, comprehensive updating of earlier material, a critique of the literature, and policy recommendations, here Dow presents the capstone work of his career, encompassing more than three decades of theoretical research.

Part I. Setting the Stage: 1. The puzzling asymmetry
Part II. Perfection and Symmetry: 2. Profit maximization and control rights
3. The labor-managed firm in the short run
4. The labor-managed firm in the long run
5. The labor-managed firm in general equilibrium
Part III. Imperfection and Asymmetry: 6. Empirical asymmetries (I)
7. Empirical asymmetries (II)
8. The rarity of labor-managed firms
Part IV. Appropriation Problems: 9. Imperfect appropriation
10. Firm formation with adverse selection
11. Partnership markets with adverse selection
Part V. Public Good Problems: 12. Collective choice and investor takeovers
13. Free riding and employee buyouts
Part VI. Opportunism Problems (I): 14. Transaction cost economics
15. Firm-specific investments
Part VII. Opportunism Problems (II): 16. Asset ownership and work incentives
17. Capital stocks and labor flows
18. Honest and dishonest controllers
Part VIII. Synthesis and Agenda: 19. Breaking the symmetry
20. Policy directions.

Subject Areas: Economic history [KCZ], Economic systems & structures [KCS], Labour economics [KCF], Economics of industrial organisation [KCD], Economic theory & philosophy [KCA]