Is open source software a complementary good or a substitute good for developer labor?

I think the answer is that it tends to be a complementary good, driving demand for developer labor. Apache, mysql, ror, etc, let more of a company's software budget be paid to labor than would have happened with Netscape server, oracle or some costly 4gl language.

There are times when it is a plain substitute, especially when combined with that mechanic you speak of. See http://mikecr.it/ramblings/drupals-golden-handcuffs for more on that.

More on complementary and substitute goods: http://www.joelonsoftware.com/articles/StrategyLetterV.html