The Economics of Workers’ Enterprises

  • Paul R. Kleindorfer
  • Murat R. Sertel
Part of the International Economic Association Series book series (IEA)


The economics of labour management and producer cooperatives began in earnest with Ward’s celebrated paper in 1958 (Ward, 1958). The Wardian theory of the labour-managed firm (LMF) was extended in the early contributions of Domar (1966), Vanek (1970) and Meade (1972) to a general theory of labour-managed industries and economies. A basic characteristic of this literature was the maintained assumption that workers in the LMF would maximize dividend per worker-member, defined as the value added per worker. Thus, the LMF chooses inputs in the long and short run so as to maximize
$$v = \frac{V}{L} = \frac{{pY - rK}}{L} = \frac{{pF(K,L) - rK}}{L}$$
where V is value added, L is labour, K is capital and p is the market price for the firm’s output Y = F(K, L), r is the rental price of capital, and F is the firm’s production function which is assumed to exhibit positive and decreasing marginal products of capital (∂F/∂K) and labour (∂F/∂L)


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Copyright information

© International Economic Association 1993

Authors and Affiliations

  • Paul R. Kleindorfer
    • 1
  • Murat R. Sertel
    • 2
  1. 1.University of PennsylvaniaUSA
  2. 2.Boğaziçi UniversityUSA

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