Institutionalist Theories of the Wage Bargain: Beyond Demand and Supply

Daphne T. Greenwood

Journal of Economic Issues, 2016, vol. 50, issue 2, 406-414

Abstract: I distill an integrated structure of institutionalist theories of wage determination, linked by overarching views of reality and key principles, and show that three fundamental propositions connect these into one “extended family.” I then outline ten principles that reflect the models and propositions. While very different in form than the familiar Walrasian price-auction model, this relatively succinct approach to wage determination leads to many testable hypotheses. It also explains questions, such as: Why can the minimum wage not often be raised without causing unemployment? Why has wage inequality increased within occupations and educational levels, as well as between? Why does high pay tend to be accompanied by better benefits, working conditions, and on-the-job training (rather than compensating for the lack of one of these)? The insights of many contemporary institutional economists, including Robert Prasch, are particularly important to this analysis, along with earlier work of John R. Commons, John Dunlop, Lloyd Reynolds, and Lester Thurow.

Date: 2016
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DOI: 10.1080/00213624.2016.1176493

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