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A theory of codetermination

A theory of codetermination This paper has developed a framework of theory within which codetermination, collective bargaining, individual bargaining, and workers' management may be compared. This has required a rather long digression on the theory of labor contracts in general when effort is endogenous but is wholly specified by the contract (section II) and when effort is multidimensional and labor contracts are incomplete (section III). When labor contracts are incomplete, suboptimization behavior results, and this in turn implies inefficiency. The inefficiency is displayed in a maximization problem by a structure which formally resembles the Lipsey-Lancaster “second-best” solution. Codetermination permits improved efficiency by creating a context of joint management decision in which some of the “free” variables may be jointly determined, with the result that some “second-best” constraints are relaxed. Thus the theory allows a possibility that power-sharing can in itself shift the effort-productivity frontier outward. This is an empirical question, of course, but one which is excluded from consideration by theories in the neoclassical and Illyrian tradition which are based on homogenous labor and complete labor contracts. Thus, the theory set forth here should supplant the less general neoclassical and Illyrian hypotheses unless and until evidence is offered which supports those hypotheses. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics Springer Journals

A theory of codetermination

McCain, Roger
Journal of Economics , Volume 40 (2) – Feb 23, 2005
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Publisher
Springer Journals
Copyright
Copyright © 1980 by Springer-Verlag
Subject
Economics; Economics, general; Economic Theory/Quantitative Economics/Mathematical Methods; Microeconomics; Macroeconomics/Monetary Economics//Financial Economics; Public Finance; Game Theory, Economics, Social and Behav. Sciences
ISSN
0931-8658
eISSN
1617-7134
DOI
10.1007/BF01282510
Publisher site
See Article on Publisher Site

Abstract

This paper has developed a framework of theory within which codetermination, collective bargaining, individual bargaining, and workers' management may be compared. This has required a rather long digression on the theory of labor contracts in general when effort is endogenous but is wholly specified by the contract (section II) and when effort is multidimensional and labor contracts are incomplete (section III). When labor contracts are incomplete, suboptimization behavior results, and this in turn implies inefficiency. The inefficiency is displayed in a maximization problem by a structure which formally resembles the Lipsey-Lancaster “second-best” solution. Codetermination permits improved efficiency by creating a context of joint management decision in which some of the “free” variables may be jointly determined, with the result that some “second-best” constraints are relaxed. Thus the theory allows a possibility that power-sharing can in itself shift the effort-productivity frontier outward. This is an empirical question, of course, but one which is excluded from consideration by theories in the neoclassical and Illyrian tradition which are based on homogenous labor and complete labor contracts. Thus, the theory set forth here should supplant the less general neoclassical and Illyrian hypotheses unless and until evidence is offered which supports those hypotheses.

Journal

Journal of Economics – Springer Journals

Published: Feb 23, 2005

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