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A Theory of the Labor-Managed Firm Embedded in Popular Culture

Author

Listed:
  • Nyssens, Marthe

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Van der Linden, Bruno

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

This article develops a (partial equilibrium) microeconomic theory of popular-economy organizations (PEOs). Motivated by empirical data on PEOs in Santiago de Chile, we show that they are labor-managed firms (LMFs) embedded in dense social networks where cooperation between worker-members plays a central role. Starting from LMF models where worker-members share the risk of layoffs, we introduce the role of cooperation and possible dimensions of embeddedness (compensations of laid-off members, absence of two-tier contracts, permanent membership) in a static and a dynamic framework. We take advantage of the close connection between the representation of the LMF and the literature on efficient contracts in unionized capital-managed firms. We compare our results with traditional LMFs and profit-maximizing firms (PMFs) models.

Suggested Citation

  • Nyssens, Marthe & Van der Linden, Bruno, 1996. "A Theory of the Labor-Managed Firm Embedded in Popular Culture," LIDAM Discussion Papers IRES 1996005, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1996005
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