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Why Capital Hires Labor: A Bargaining Perspective

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  • Dow, Gregory K

Abstract

Organizational forms often serve as vehicles for the appropriation of quasi-rent. Capitalist firms typically emerge when production requires noncontractible investments in specific physical assets because worker control would divert quasi-rents away from ass et owners ex post. Conversely, labor-managed firms tend to emerge in niches requiring specialized human capital but general-purpose physi cal assets. A key result is that capitalist firms can persist in competitive markets even when labor-managed firms would yield a larg er total surplus. Copyright 1993 by American Economic Association.

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  • Dow, Gregory K, 1993. "Why Capital Hires Labor: A Bargaining Perspective," American Economic Review, American Economic Association, vol. 83(1), pages 118-134, March.
  • Handle: RePEc:aea:aecrev:v:83:y:1993:i:1:p:118-34
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