p.671

Compensation of Cooperating Factors

Alan V. Deardorff
Frank P. Stafford

Abstract

Labor supply and demand behavior is examined under the assumption that the firm's technology depends on the simultaneous presence, during the workday, of two factors of production, either labor and capital or two types of labor differentiated by skill. If desired workdays differ, this leads to payment to both factors of a premium over their traditional sector wage and to the establishment of a workday for labor that departs from simple labor-leasure preferences. It also provides implications, in the presence of capital, for the determination of work shifts.