The Theory of the Labour-Managed Firm Revisited: The Voluntary Interactive Approach.

Membership in the authors' labor-managed firm is determined in the long run by expected income maximization. In the short run, upon the realization of output price, each member may leave the labor-managed firm. However, a decision to leave when the entire membership quits is associated with fixed cost. This arrangement ensures ex post egalitarianism and sense of job security. The authors' short-run result is that employment does not exhibit a perverse response to price variations. The long-run result is that their labor-managed firm is more populous than the Illyrian firm and may even be more than its capitalistic twin. Copyright 1993 by Royal Economic Society.