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 macroeco nomics. The model exhibits Keynesian characteristics that are a conseq uence of imperfect competition. The magnitude of the autonomous multip lier is found to be identical to that in the profit maximizing economy (PME), but the mechanism of the multiplier is different. The multipli ers become larger as competition in the goods market becomes less perf ect. In our model, fiscal policies are effective and have the usual ef fects in the LME as in the PME. Our results are contrary to a conjectu re of Meade and Vanek but consistent with recent theoretical findings. (C) 1996 Academic Press, Inc.