On the Neutrality of Asset Ownership for Work Incentives
AbstractTwo ownership systems are compared: one where outsiders own the physical assets of firms and another where these assets are jointly owned by workers. Effort and side payments are self-enforced. Market-wide incentive constraints lead to restrictions on the distribution of profit between capital and labor which differ for the two systems. But these asymmetries are exactly offset by the bundling of input returns in a joint ownership economy, so for any self-enforcing equilibrium on the second-best frontier of one system there exists an equivalent equilibrium on the frontier of the other. An efficient outside ownership economy cannot be destabilized by spontaneous transitions to joint ownership or conversely. When capital is scarce, welfare maximization requires that all profit go to workers, but when labor is scarce all profit should go to asset owners.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Comparative Economics.
Volume (Year): 28 (2000)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/inca/622864
Other versions of this item:
- Dow, G.L., 1999. "On the Neutrality of Asset Ownership for Work Incentives," Discussion Papers dp99-1, Department of Economics, Simon Fraser University.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
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.:
- Andolfatto, D., 1993.
"Optimal Team Contracts,"
9306, University of Waterloo, Department of Economics.
- Dow, Gregory K, 1993. "Why Capital Hires Labor: A Bargaining Perspective," American Economic Review, American Economic Association, vol. 83(1), pages 118-34, March.
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- 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.
- Chang, Juin-jen & Lai, Ching-chong & Lin, Chung-cheng, 2003. "Profit sharing, worker effort, and double-sided moral hazard in an efficiency wage model," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 75-93, March.
- Gregory K. Dow, 2000.
"The Ultimate Control Group,"
dp00-16, Department of Economics, Simon Fraser University, revised Aug 2000.
- Dow, Gregory K. & Putterman, Louis, 2000. "Why capital suppliers (usually) hire workers: what we know and what we need to know," Journal of Economic Behavior & Organization, Elsevier, vol. 43(3), pages 319-336, November.
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