A macroeconomic model of a labor-managed economy: A new Keynesian approach?

We present a macroeconomic model of a labor-managed economy (LME) with imperfectly competitive firms in the spirit of New Keynesian macroeconomics. The model exhibits Keynesian characteristics that are a consequence of imperfect competition. The magnitude of the autonomous multiplier is found to be identical to that in the profit maximizing economy (PME), but the mechanism of the multiplier is different. The multipliers become larger as competition in the goods market becomes less perfect. In our model, fiscal policies are effective and have the usual effects in the LME as in the PME. Our results are contrary to a conjecture of Meade and Vanek but consistent with recent theoretical findings. (C) 1996 Academic Press, Inc.