The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Labour-Managed Firms

  • Louis Putterman
Reference work entry


Labour-managed firms (LMFs) are enterprises over which suppliers of labour hold full control rights. Theoretical analysis suggests that such firms will behave in a distinctive and sometimes ‘perverse’ manner in response to short-run changes, but richer models can reverse the more problematic results, and the simple model indicates that LMFs behave no differently from capitalist firms in long-run competitive equilibrium. Empirical studies indicate that LMFs, while uncommon in most market economies, can achieve high productive efficiency. The search for an understanding of why LMFs are relatively rare has contributed to both positive and normative economic analysis.


Codetermination Democracy Efficiency wages Firm, theory of Free-rider problem Labour-managed firms Mill, J. S. Ownership and control Partnerships Profit sharing Socialism Total factor productivity Wage differentials 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Louis Putterman
    • 1
  1. 1.