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Thorstein Veblen on the nature of the firm and income distribution

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  • Guglielmo Forges Davanzati

    (University of Salento (IT))

Abstract

The aim of this paper is to provide a theoretical model inspired by Veblen’s theory of the firm, and to derive some implications of firms’ behaviour for the process of income distribution. It will be shown that the firm is a locus of conflict, involving technicians – interested in expanding production – and “businessmen” – interested in gaining money profits via the management of the “pecuniary side” of the firm. The outcome of the bargaining within the firm defines the ‘workmanship-type’ or ‘non-workmanship-type’ nature of the firm, and affects the level of real wages and employment, insofar as the greater the power of technicians, the higher the real wages are. Moreover, since the expansion of production is associated with the minimum degree of underutilization of capital, technical improvements have a positive effect on the level of employment. Finally, it is argued that a wage increase can have a positive effect on the degree of capital utilization and the level of employment, via the increase in total demand and in the degree of capital utilization.

Suggested Citation

  • Guglielmo Forges Davanzati, 2016. "Thorstein Veblen on the nature of the firm and income distribution," Working Papers PKWP1618, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp1618
    as

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    File URL: https://www.postkeynesian.net/downloads/working-papers/PKWP1618.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Veblen; theory of firm; wages; income distribution;
    All these keywords.

    JEL classification:

    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D30 - Microeconomics - - Distribution - - - General

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