On the Neutrality of Asset Ownership for Work Incentives
Two 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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|Date of creation:||1999|
|Contact details of provider:|| Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada|
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- Andolfatto, D., 1993.
"Optimal Team Contracts,"
9306, University of Waterloo, Department of Economics.
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- Dow, G & Putterman, L, 1996. "Why Capital (Usually) Hires Labor : An Assessment of Proposed Explanations," Discussion Papers dp97-03, Department of Economics, Simon Fraser University.
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