Cyclical Variations in the Labour Input : A Comparison of Capitalist and Labour-Managed Firms

An important question is whether the responses to cyclical variations in demand are different for a capitalist firm (CF) and a labour-managed firm (LMF) within a particular economy. The focus of this paper is how a given change in the labour input would be divided between its three components : employment, hours and effort. The existence of a bilateral monopoly in the F employment relation, together with a differing response to a deterioration in the labour market, leads us to conclude that, relative to the CF, the LMF will reduce effort more and employment less in a downturn.