Characteristics of Labor Markets Varying with Perturbations of Relative Markups

ABSTRACT

This article examines a model of long-period positions with markup pricing. The variation in certain characteristics of the wage frontier with perturbations of relative markups is illustrated. This analysis provides a demonstration of the emergence of the reswitching of techniques and of capital reversing, for example, in non-competitive markets.

KEYWORDS:

• Cambridge capital controversy
• labor markets
• markup pricing

JEL CLASSIFICATION:

• B51
• C67
• D43

Acknowledgements

I thank three reviewers for comments on previous versions and Louis-Philippe Rochon for his patience and guidance. The author alone is responsible for remaining errors and infelicities.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 Some of these phenomena are reswitching, process recurrence, a reverse substitution of labor, and capital-reversing. Counter-intuitive results in the theory of joint production, including in the analysis of the economic life of machines and of rent, are abstracted from in this article. Cohen & Harcourt (2003) and Lazzarini (2011) survey the CCC.

2 ‘Given sufficient refinement of analysis no doubt many other such ‘assumptions’, may have to be added. (One obvious candidate which has not been incorporated yet in neoclassical models is the absence of ‘Sraffa effects’ - though it may be difficult to formulate the necessary conditions explicitly)’ (Kaldor 1966, p. 309).

3 Vienneau (2005) illustrates the two-commodity case for Roemer’s reproducible solution with competitive markets.

4 This paper does not consider the difficult issues of the temporal dynamics of market prices, of institutions that facilitate market discovery, or of the realization of sales with rates of profits consistent with the given ratios of markups among industries.

5 This definition extends that in Kurz and Salvadori (1995) to allow for persistent profit differentials among industries.

6 Steedman (1981) presents the price equations for a single technique in this form, given differential profit rates.

7 Capital-reversing can occur without reswitching on the frontier. A reverse substitution of labor can occur with neither reswitching nor capital-reversing. Process recurrence is likewise independent of reswitching and capital-reversing.

8 The structure of this example does not allow one to consider fluke cases in which three or more processes for a single industry are in cost-minimizing techniques at a single switch point.

9 ‘ … One who believes technology to be more like my 1966 reswitching example than its orthodox contrast, will have a more sanguine view about how successful militant power by organized labor can be in causing egalitarian shifts in the distribution of income away from property even in the long run.’ (Samuelson 1975, p. 46)

10 Consider a model in which all managers of firms know of some processes in all industries, but some processes in some industries are known by various restricted sets of managers. Whether or not these secrets in manufacturing are in cost-minimizing techniques might depend on the level of the wage. Then the struggle among capitalists depends on the struggle between labor and capital.