* I am extremely grateful to the National Council for Soviet and East European Research for finan... more * I am extremely grateful to the National Council for Soviet and East European Research for financial support of this research (Contract #807-07) and to the people in Hungary and Poland who educated me about these issues. I wish to thank especially Istvan Abel, Ryszard Kokoszcznski, ...
... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect t... more ... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect to influence norm reporting or actual performance. To introduce the ratchet effect requires explicit consideration of the inter-action between ...
Abstract In this paper we establish the robustness of the comparative static results under manage... more Abstract In this paper we establish the robustness of the comparative static results under managerial risk aversion and discretionary behavior for the Bonin- and Weitzman-type Soviet incentive schemes. Specifically, we show that the self-imposed target (forecasted performance) responds appropriately to changes in the penalty piecerates and that the share parameter can be used to encourage a higher norm and an accompanying higher level of managerial effort. Our results correct an error in the literature on the Bonin-type scheme and impose weaker conditions than previous work on the Weitzman-type scheme.
... be larger than the previous full-employment level (Q*). Although initial membership is an imp... more ... be larger than the previous full-employment level (Q*). Although initial membership is an important element of the short-run supply curve for our egalitarian cooperative, we find none of the abnormalities present in Brewer-Browning because we assume that the debt obligation is ...
Abstract The collective farm household's optimal allocation of time among work on both the co... more Abstract The collective farm household's optimal allocation of time among work on both the collective and private plots and leisure is analyzed in certain and uncertain environments. The examination of static equilibrium solutions indicates that the collective farm need not be inefficient nor provide poor work incentives. Uncertainty is shown to exert a distinctive influence on work allocations. Implications are drawn from comparative static analysis to discuss the effects of government policy, e.g., increased crop quotas, on work incentives. The Soviet development period, recent agricultural reforms in the Khrushchev-Brezhnev era, and general policy implications are considered in the light of these new analytical results.
In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure mod... more In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure model” of the labor-managed firm whose objective is to maximize short-run dividend per worker by varying freely a single input, labor. Following the Ward(1958) tradition, Muzondo assumes that any variation in labor requires a change in the membership base on which the dividend is calculated. For this “pure model” of the labor-managed firm (hereafter, L-M), Muzondo claims four main results: (1) a risk-averse L-M firm produces more output than a risk-neutral L-M firm; (2) under constant risk aversion the responses of an L-M firm under price uncertainty are, generally, the same as those under certainty; (3) under decreasing absolute or increasing relative risk aversion, the responses of an L-M firm are, generally, unpredictable; and (4) except for result (2), the responses of L-M firms under price uncertainty are, generally, different from those under price certainty. Although results (1) and (2) are correct, results (3) and (4) are incorrect due to a recurring error in the proofs contained in the appendix of Muzondo’s paper. In fact, we show in this note that many of the responses of an L-M firm under price uncertainty are qualitatively the same as those under price certainty given Muzondo’s assumptions. In particular, the L-M firm will increase employment when fixed charges are increased and decrease output in response to an upward shift in the distribution of output price. Both are equivalent to the results shown by Ward for the price-certain case. From a policy perspective, the response of the L-M firm to tax changes is important. However, except for the result that is ambiguous, Muzondo’s qualitative results are incorrect and should not be used for policy prescriptions. Furthermore, when signable, the responses of the L-M firm to a change in a tax parameter are always the opposite of those of the capitalist-managed (hereafter, C-M) counterpart.
* I am extremely grateful to the National Council for Soviet and East European Research for finan... more * I am extremely grateful to the National Council for Soviet and East European Research for financial support of this research (Contract #807-07) and to the people in Hungary and Poland who educated me about these issues. I wish to thank especially Istvan Abel, Ryszard Kokoszcznski, ...
... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect t... more ... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect to influence norm reporting or actual performance. To introduce the ratchet effect requires explicit consideration of the inter-action between ...
Abstract In this paper we establish the robustness of the comparative static results under manage... more Abstract In this paper we establish the robustness of the comparative static results under managerial risk aversion and discretionary behavior for the Bonin- and Weitzman-type Soviet incentive schemes. Specifically, we show that the self-imposed target (forecasted performance) responds appropriately to changes in the penalty piecerates and that the share parameter can be used to encourage a higher norm and an accompanying higher level of managerial effort. Our results correct an error in the literature on the Bonin-type scheme and impose weaker conditions than previous work on the Weitzman-type scheme.
... be larger than the previous full-employment level (Q*). Although initial membership is an imp... more ... be larger than the previous full-employment level (Q*). Although initial membership is an important element of the short-run supply curve for our egalitarian cooperative, we find none of the abnormalities present in Brewer-Browning because we assume that the debt obligation is ...
Abstract The collective farm household's optimal allocation of time among work on both the co... more Abstract The collective farm household's optimal allocation of time among work on both the collective and private plots and leisure is analyzed in certain and uncertain environments. The examination of static equilibrium solutions indicates that the collective farm need not be inefficient nor provide poor work incentives. Uncertainty is shown to exert a distinctive influence on work allocations. Implications are drawn from comparative static analysis to discuss the effects of government policy, e.g., increased crop quotas, on work incentives. The Soviet development period, recent agricultural reforms in the Khrushchev-Brezhnev era, and general policy implications are considered in the light of these new analytical results.
In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure mod... more In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure model” of the labor-managed firm whose objective is to maximize short-run dividend per worker by varying freely a single input, labor. Following the Ward(1958) tradition, Muzondo assumes that any variation in labor requires a change in the membership base on which the dividend is calculated. For this “pure model” of the labor-managed firm (hereafter, L-M), Muzondo claims four main results: (1) a risk-averse L-M firm produces more output than a risk-neutral L-M firm; (2) under constant risk aversion the responses of an L-M firm under price uncertainty are, generally, the same as those under certainty; (3) under decreasing absolute or increasing relative risk aversion, the responses of an L-M firm are, generally, unpredictable; and (4) except for result (2), the responses of L-M firms under price uncertainty are, generally, different from those under price certainty. Although results (1) and (2) are correct, results (3) and (4) are incorrect due to a recurring error in the proofs contained in the appendix of Muzondo’s paper. In fact, we show in this note that many of the responses of an L-M firm under price uncertainty are qualitatively the same as those under price certainty given Muzondo’s assumptions. In particular, the L-M firm will increase employment when fixed charges are increased and decrease output in response to an upward shift in the distribution of output price. Both are equivalent to the results shown by Ward for the price-certain case. From a policy perspective, the response of the L-M firm to tax changes is important. However, except for the result that is ambiguous, Muzondo’s qualitative results are incorrect and should not be used for policy prescriptions. Furthermore, when signable, the responses of the L-M firm to a change in a tax parameter are always the opposite of those of the capitalist-managed (hereafter, C-M) counterpart.
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Papers by John Bonin