Appropriability rules, capital maintenance, and the efficiency of cooperative investment

THE INVESTMENT BEHAVIOUR OF A LABOUR‐MANAGED FIRM (1)

“…In such a case, an investment in real assets, to be opted for, would have to earn gross profits having the same total present value as investment in bank deposits, but not over the lifetime of the plant, as in a capitalist firm, but over the expected tenure of workers. The difference in criteria can lead to the different ranking of projects : projects with high returns over the LMF's time horizon may be accepted because of shorter payback periods, even though those with higher rates of return are rejected, and therefore, a LMF may place liquidity concerns above the productivity of capital, discriminating against projects stretching beyond the workers' horizon (Bonin, 1985 ;Zafiris, 1982).…”

“…If, on the contrary, Furubotn and Pejovich wanted to examine the specific case of a Yugoslav LMF, it is misleading not to have taken into account other features, along with social property and the CMR, peculiar to the Yugoslav context. The authors propose inflation will be present in a labour-managed economy, but fail to consider that since Yugoslav law requires that capital is maintained at its original book value, inflation could render the CMR partially ineffective, when replacement costs exceed historical cost (Bonin, 1985 ;Zafiris, 1982). Inflation has been a characteristic feature of the Yugoslav economy since 1965 and has probably caused a systematic bias in favour of nonowned assets (see Sacks, 1983, p. 81-83).…”

The Economic Analysis of Labour‐managed Firms*

“…See particularlyBonin (1985),Furubotn (1974),Gui (1981),Nutzinger (1982) andCompare for instance the Mondragon Cooperatives, seeBradley and Gelb (1983) Zafiris (1982)…”