Corporate Rules, Distributive Justice, and Efficiency

The question whether corporations should be used as a means for administering distributive justice is crucial. There are two fundamental issues associated with this. Firstly, would the introduction of rules have any distributional effect? Secondly, what would be the efficiency cost? In this paper, we explore both questions with reference to a job-security corporate rule. We show that the job-security rule will always produce distributional consequences which are consistent with its objectives. However, whether or not it is a socially desirable policy depends on whether the economy is at an efficient allocation and what motivated the policy. It can be shown that under some conditions, even if the initial allocation is efficient, yet not the socially desirable one, a corporate rule—like the job security one—may produce socially desirable gains. The same can be said in the case where the initial allocation is inefficient even in the presence of competitive markets (due to incompleteness problems). However, these social gains would come at the expense of competitiveness. In an internationally open environment this may offset the initial social gains from this policy. Whether or not this happens would then depend on whether agents have a social dimension to their preferences or not. If they do, their response to the initiative may offset the initial loss of competitiveness. Alternatively, society may face the dilemma whether to remain open to uphold local conceptions of distributive justice