Seniority-wage system and the growth of a labor-managed firm

This paper formulates a simple growth model of a labor-managed firm with 4 seniority-wage system. The seniority-wage system is shown to be an engine for the growth of the labor-managed firm. Moreover, the labor-managed firm has no incentive to grow without the seniority-wage system, which is consistent with the result of A. B. Atkinson (Quart. J. Econ. 87, 3:375-392, Aug. 1973). The short-run and long-run effects of changes in the slope of the wage-tenure profile, the price of output, the rental price of capital, and the discount rate are examined. (C) 2000 Academic Press.