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The Illyrian Firm Revisited

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  • Hajime Miyazaki
  • Hugh M. Neary

Abstract

The labor managed firm (LMF) is viewed as a contract-based coalition of workers. The coalition contract defines the worker's membership in the LMF, gives credence to the short-run risk of layoffs, and identifies the LMF as being more than a mere neoclassical production function plus fixed cost. Our model embodies three key features: the rational worker's concern with income-employment risk, the LMF's maximization of the member's expected utility, and the distinction between the LMF's short-run workforce and its long-run membership size. The main result is twofold. First, the LMF's short-run output supply curve is upward sloping in its price, except in the range of very low output prices where revenues are so small relative to the fixed costs as to make the LMF's remuneration fall below the member's short-run reservation income. Second, of equal importance as determinants of the LMF's short-run behavior are the internal and external conditions of financing its short-run fixed cost. In this regard the article delineates the role of internal wage funds and the external insurance provisions in inducing an upward sloping pattern of LMF's output-employment responses in the short run .

Suggested Citation

  • Hajime Miyazaki & Hugh M. Neary, 1983. "The Illyrian Firm Revisited," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 259-270, Spring.
    • Handle: RePEc:rje:bellje:v:14:y:1983:i:spring:p:259-270
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    Citations

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    Cited by:

    1. Ichiishi, Tatsuro, 1985. "Management versus ownership, II," European Economic Review, Elsevier, vol. 27(2), pages 115-138, March.
    2. Julia Lane & Robert Feinberg & Harry Broadman, 2002. "Do Labour Strategies Matter? An Analysis of Two Enterprise-Level Data Sets in China," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(2), pages 225-237.
    3. Marina Albanese & Cecilia Navarra & Ermanno Tortia, 2019. "Equilibrium unemployment as a worker insurance device: wage setting in worker owned enterprises," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(3), pages 653-671, October.
    4. Navarra Cecilia & Tortia Ermanno, 2011. "Employer’s moral hazard and the emergence of worker cooperatives," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201103, University of Turin.
    5. repec:bla:annpce:v:89:y:2018:i:1:p:65-86 is not listed on IDEAS
    6. Fabio Sabatini & Francesca Modena & Ermanno Tortia, 2014. "Do cooperative enterprises create social trust?," Small Business Economics, Springer, vol. 42(3), pages 621-641, March.
    7. Sumit Joshi & Stephen C. Smith, 2002. "An Endogenous Group Formation Theory of Co-operative Networks: The Economics of La Lega and Mondragón," WIDER Working Paper Series DP2002-87, World Institute for Development Economic Research (UNU-WIDER).
    8. Filippo Belloc, 2019. "Why Isn't Uber Worker-Managed? A Model of Digital Platform Cooperatives," CESifo Working Paper Series 7708, CESifo.
    9. Tortia, Ermanno C., 2021. "Employment protection regimes and dismissal of members in worker cooperatives," MPRA Paper 109214, University Library of Munich, Germany.
    10. Albanese, Marina & Navarra, Cecilia & Tortia, Ermanno C., 2015. "Employer moral hazard and wage rigidity. The case of worker owned and investor owned firms," International Review of Law and Economics, Elsevier, vol. 43(C), pages 227-237.
    11. Cecilia Navarra & Ermanno Tortia, 2014. "Employer Moral Hazard, Wage Rigidity, and Worker Cooperatives: A Theoretical Appraisal," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(3), pages 707-726.
    12. Gregory K. DOW, 2018. "The Theory Of The Labor-Managed Firm: Past, Present, And Future," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 65-86, March.
    13. Ireland, Norman J., 2003. "Random pricing by labor-managed firms in markets with imperfect consumer information," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 573-583, September.
    14. Dow,Gregory K., 2019. "The Labor-Managed Firm," Cambridge Books, Cambridge University Press, number 9781107589650.
    15. Tortia, Ermanno Celeste, 2019. "Employment protection regimes in worker co-operatives: dismissal of worker members and distributive fairness," MPRA Paper 94536, University Library of Munich, Germany.
    16. Gaetano Cuomo, 2015. "Imprese cooperative e democrazia economica," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2015(116), pages 5-38.
    17. Carlo Borzaga & Chiara Carini & Ermanno Celeste Tortia, 2022. "Co‐operative enterprise anti‐cyclicality and the economic crisis: A comparative analysis of employment dynamics in Italy," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(3), pages 551-577, September.

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