Investment Decisions in Profit-Maximizing and Labor-Managed Enterprises : A dynamic Comparative Analysis
(1975) , 30 pages
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- Abstract
- This paper compares optimal investment policies of neo-classical and of labor-managed firms. This essentially dynamic problem is analyzed within an optimal control theory framework. The following results are derived: (I) A neoclassical firm making sufficient profit Always invest at least as much as a labor-managed firm; (II) with constant input coefficients in the production function the optimal level of gross investment for a labor-managed firm is equal to zero and in the long run, the firm disappears therefore from the market; (III) with smooth production functions the optimal level of gross investment can be different from zero for unlimited periods of time. Consequently, the labor-managed firm remains in the market forever; (IV) with smooth production functions employment in the labor-managed firm tends toward the imposed minimum employment level. This result has important practical implications: if this minimum level is too low the case of constant input coefficient will be approximated; (V) under most circumstances, output of the neoclassical firm making sufficient profit exceeds output of the labor-managed firm.
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Citations
Litt, F.-X., Steinherr, A., & Thisse, J.-F. (1975). Investment Decisions in Profit-Maximizing and Labor-Managed Enterprises : A dynamic Comparative Analysis (Working Papers Institut des sciences économiques 7517). https://hdl.handle.net/2078.5/275876