The Demand for Capital in the Share Economy
In the previous chapters we have been dealing with share systems within the Marshallian short run, in which both the number of firms and their capital stocks are given; of course, this implies that capital stocks, and therefore total profits, are generally different across firms. In this chapter we must pause to examine the problem of capital and investment, even though in a sense this is just a détour with respect to the main line of our inquiry. The reason to do so is that there is a classic argument against the efficiency of a share system which revolves around a disincentive to investment which is supposedly built into the system. This argument, which may be traced back to the sharecropping model reviewed in Chapter 2, has been recently reiterated by Meade (1986a, 1986b), Shapiro (1986), and Wadhwani (1987).
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