Labor managed firms are known to be inefficient in two respects. They produce an output which is too small from the social point of view and this output is produced inefficiently. More specifically, labor managed firms overcapitalize. We suggest a regulatory measure to be implemented through a 'wage' control. This kind of regulation has the advantage that it forces the firm to increase output and to use a more efficient input mix.
ASJC Scopus subject areas
- Economics and Econometrics