The institutional approach to labor economics

from Maria Alejandra Madi

The economist John R. Commons is considered one of the founding fathers of institutional economics. He played a leading role in the developing of the labor economics field by establishing some core principles in his book Institutional Economics: Its Place in Political Economy (1934). Besides, as Kenneth Boulding (1957) stated, Commons’ ideas as a social reformer were very influential in shaping the New Deal and the American labor legislation and social security toward a welfare state.

It is worth noting that some generations of institutionalists in labor economics can be identified since then (Champlin and Knoedler, 2004). After the first generation of Commons and the Wisconsin School, the second generation emerged in the 1950s and included those economists, such as John Dunlop and Neil Chamberlain, who rejected standard economic textbooks and emphasized the role of institutional rules in structuring labor markets and industrial relations. Afterwards, the third generation focused on structural unemployment (e.g., Charles Killignsworth), segmented labor markets (e.g., Michael Piore). This generation also included post-Keynesian economists, such as Eillen Appelbaum.  From 1980 to the present, the fourth generation has been broadened in order to include contiguous fields and new methods of research. Institutionalism has been broadened further to include the new perspective of Ronald Coase and Oliver Williamson that has informed research and model building based on the concept of transaction cost.

Despite de differences between generations, which are the elements that explain the institutionalist labor approach?     read more