Growth and Labor-Managed Firms

Some results suggest if the economy is competitive is does not matter whether firms are run capitalists or workers. In particular, in the long run labor-managers use the same amount of labor and hire the same amounts of non-labor inputs as a similar capitalists firm. Here we reexamine this issue when the production possibilities are characterized by technical progress. It is argued that labor-managers can sometimes increase the present value of firm-members’ income by committing to a policy of steadily reduction of labor-use. In turn this implies that changes of the saving rate changes growth.