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General Equilibrium in a Labor-Managed Economy with Uncertainty and Incomplete Markets

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Author Info

  • Richard E. Kihlstrom

    (University of Pennsylvania)

  • Jean-Jacques Laffont

    (Universite des Sciences Sociales de Toulouse)

Abstract

This paper studies the free entry competitive equilibria of a labor managed economy when there are less than complete contingent claims markets. First, we prove the existence of a simple labor management equilibrium which is inefficient in the Diamond sense. Second, we introduce an insurance system internal to the firm and show that the resulting equilibrium exists and is Diamond efficient. This insurance system plays for a labor managed economy the same role as fixed obligation debt markets in an entrepreneurial stock market equilibrium.

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File URL: http://www.aeconf.net/Articles/May2002/aef030111.pdf
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Bibliographic Info

Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 3 (2002)
Issue (Month): 1 (May)
Pages: 185-217

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Handle: RePEc:cuf:journl:y:2002:v:3:i:1:p:185-217

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Web page: http://www.aeconf.net/
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Related research

Keywords: Labor-management; Uncertainty; Incomplete markets; General equilibrium;

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References

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  1. Steinar Ekern & Robert Wilson, 1974. "On the Theory of the Firm in an Economy with Incomplete Markets," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 171-180, Spring.
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Cited by:
  1. Ping Yan, 2011. "Optimal Unemployment Insurance with Endogenous Search Effort," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 347-369, November.

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