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The Labor-Managed Firm
Theoretical Foundations


  • Date Published: May 2019
  • availability: Available
  • format: Paperback
  • isbn: 9781107589650

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About the Authors
  • In previous work, Gregory K. Dow created a broad and accessible overview of worker-controlled firms. In his new book, The Labor-Managed Firm: Theoretical Foundations, Dow provides the formal models that underpinned his earlier work, while developing promising new directions for economic research. Emphasizing that capital is alienable while labor is inalienable, Dow shows how this distinction, together with market imperfections, explains the rarity of labor-managed firms. This book uses modern microeconomics, exploits up-to-date empirical research, and constructs a unified theory that accounts for many facts about the behavior, performance, and design of labor-managed firms. With a large number of entirely new chapters, comprehensive updating of earlier material, a critique of the literature, and policy recommendations, here Dow presents the capstone work of his career, encompassing more than three decades of theoretical research.

    • Represents a substantial advance over previous theoretical work in the field so that readers may appreciate the use of game theory, the economics of information, and other contemporary tools
    • Grounds its theory in a large body of reliable empirical knowledge
    • Bases its policy ideas on reliable empirical knowledge and sophisticated economic theory
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    Reviews & endorsements

    'Gregory K. Dow has thought more deeply and in a more sustained manner about the puzzle of why capital hires labor than any serious student of economic theory since the first efforts in the field were undertaken more than a generation ago. The present effort to organize, revisit, and distil the conclusions from his investigations is rigorous, laid out with admirable clarity, and always intellectually honest and clear-headed. Louis Putterman, Brown University, Rhode Island

    'Bringing together a lifetime's research, The Labor-Managed Firm lays out the failures of the classic model of cooperatives that assumes that they maximize income per worker instead of profits. It offers an array of ideas about the relation between labor and capital to account for the sparsity of coops in market economies.' Richard Freeman, Harvard University, Massachusetts

    'This book provides an expansive economic theory of firms controlled by their employees. It explores the birth, evolution and possible transformation of such firms in comparison to conventional investor-owned firms. Although it is a primarily theoretical work, it refers to the empirical literature so the reader gets a broad understanding of this sector of the economy. The theoretical analyses presented in this book provide guidance to practitioners. I highly recommend this book to all those interested in employee ownership.' Avner Ben-Ner, Center for Human Resources and Labor Studies, University of Minnesota

    'In this remarkable work, Dow synthesizes his extensive research on the economics of labor-managed enterprises. Economists working in the field will find both an indispensable assessment of the literature and a fruitful catalyst for fresh theoretical and empirical investigations. Those new to the subject will discover insights about the manifold ways in which market conditions shape how firms are governed.' Gilbert Skillman, Wesleyan University, Connecticut

    'Does current corporate governance reflect market efficiency, or are there potentially better ways to organize and run corporations? Gregory K. Dow takes this question to a new level by pulling together his own and others' theoretical work on labor-managed firms, providing a thoughtful comparison of the conditions favoring capital-managed and labor-managed firms. This is a masterful contribution to basic issues of economic organization, with implications for how we should design firms and public policy.' Douglas Kruse, Rutgers University, New Jersey

    'This is a lovely book, and one we have needed for several decades. It offers a genuinely novel perspective on the theory of labor-managed firms, informed at every step by a careful attention to empirical findings and by the institutional makeup of real-world worker cooperatives and employee-owned firms. Dow has spent some thirty years thinking about these issues, and brings his work together in an impressive whole. It will redefine the theoretical and empirical research agendas, as well as providing an invaluable text in support of a postgraduate course on economic democracy.' Virginie Pérotin, University of Leeds

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    Product details

    • Date Published: May 2019
    • format: Paperback
    • isbn: 9781107589650
    • dimensions: 229 x 152 x 22 mm
    • weight: 0.573kg
    • availability: Available
  • Table of Contents

    Part I. Setting the Stage:
    1. The puzzling asymmetry
    Part II. Perfection and Symmetry:
    2. Profit maximization and control rights
    3. The labor-managed firm in the short run
    4. The labor-managed firm in the long run
    5. The labor-managed firm in general equilibrium
    Part III. Imperfection and Asymmetry:
    6. Empirical asymmetries (I)
    7. Empirical asymmetries (II)
    8. The rarity of labor-managed firms
    Part IV. Appropriation Problems:
    9. Imperfect appropriation
    10. Firm formation with adverse selection
    11. Partnership markets with adverse selection
    Part V. Public Good Problems:
    12. Collective choice and investor takeovers
    13. Free riding and employee buyouts
    Part VI. Opportunism Problems (I):
    14. Transaction cost economics
    15. Firm-specific investments
    Part VII. Opportunism Problems (II):
    16. Asset ownership and work incentives
    17. Capital stocks and labor flows
    18. Honest and dishonest controllers
    Part VIII. Synthesis and Agenda:
    19. Breaking the symmetry
    20. Policy directions.

  • Author

    Gregory K. Dow, Simon Fraser University, British Columbia
    Gregory K. Dow has been Professor of Economics at Simon Fraser University, British Columbia since 1995 and chaired the economics department during 2001–6. He has held previous academic positions at the University of Alberta and Yale University, Connecticut. His articles have appeared in the leading journals of the profession, including the American Economic Review and the Journal of Political Economy. His previous book Governing the Firm: Workers' Control in Theory and Practice was published by Cambridge in 2003.

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