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Collective Choice and Control Rights in Firms

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Author Info
GREGORY K. DOW
GILBERT L. SKILLMAN

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Abstract

Recent writers have asserted that firms controlled by workers are rare because workers have diverse preferences over firm policies, while investors all support wealth maximization. However, the source of the asymmetry between capital and labor remains unclear. We resolve this puzzle by arguing that because financial capital is exceptionally mobile, capital markets induce unanimity. The lower mobility of human capital implies that labor markets are monopolistically competitive and hence that unanimity cannot be expected in labor-managed firms. Moreover, such firms are vulnerable to takeover by investors, while capital-managed firms are substantially less vulnerable to takeover by workers. Copyright 2007 Blackwell Publishing, Inc..

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9779.2007.00300.x
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Publisher Info
Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 9 (2007)
Issue (Month): 1 (02)
Pages: 107-125
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Handle: RePEc:bla:jpbect:v:9:y:2007:i:1:p:107-125

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Dreze, Jacques H & Hagen, Kare P, 1978. "Choice of Product Quality: Equilibrium and Efficiency," Econometrica, Econometric Society, vol. 46(3), pages 493-513, May. [Downloadable!] (restricted)
  2. Hart, Oliver D, 1979. "On Shareholder Unanimity in Large Stock Market Economies," Econometrica, Econometric Society, vol. 47(5), pages 1057-83, September. [Downloadable!] (restricted)
  3. Makowski, Louis, 1983. "Competitive Stock Markets," Review of Economic Studies, Blackwell Publishing, vol. 50(2), pages 305-30, April. [Downloadable!] (restricted)
  4. Chris Doucouliagos, 1995. "Worker participation and productivity in labor-managed and participatory capitalist firms: A meta-analysis," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 49(1), pages 58-77, October.
  5. Sadanand, Asha B & Williamson, John M, 1991. "Equilibrium in a Stock Market Economy with Shareholder Voting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 1-35, February. [Downloadable!] (restricted)
  6. Dow, Gregory K., 1986. "Control rights, competitive markets, and the labor management debate," Journal of Comparative Economics, Elsevier, vol. 10(1), pages 48-61, March. [Downloadable!] (restricted)
  7. Gregory Dow, 1996. "Replicating Walrasian equilibria using markets for membership in labor-managed firms," Review of Economic Design, Springer, vol. 2(1), pages 147-162, December. [Downloadable!] (restricted)
  8. Kramer, Gerald H, 1973. "On a Class of Equilibrium Conditions for Majority Rule," Econometrica, Econometric Society, vol. 41(2), pages 285-97, March. [Downloadable!] (restricted)
  9. Michael Magill & Martine Quinzii, 2002. "Theory of Incomplete Markets, Volume 1," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262632543.
  10. Hart, Oliver D, 1979. "Monopolistic Competition in a Large Economy with Differentiated Commodities," Review of Economic Studies, Blackwell Publishing, vol. 46(1), pages 1-30, January. [Downloadable!] (restricted)
  11. Makowski, Louis & Pepall, Lynne, 1985. " Easy Proofs of Unanimity and Optimality without Spanning: A Pedagogical Note," Journal of Finance, American Finance Association, vol. 40(4), pages 1245-50, September. [Downloadable!] (restricted)
  12. McKelvey, Richard D, 1979. "General Conditions for Global Intransitivities in Formal Voting Models," Econometrica, Econometric Society, vol. 47(5), pages 1085-1112, September. [Downloadable!] (restricted)
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