Research Handbook on the Economics of Labor and Employment Law
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Research Handbook on the Economics of Labor and Employment Law

Edited by Cynthia L. Estlund and Michael L. Wachter

This Research Handbook assembles the original work of leading legal and economic scholars, working in a variety of traditions and methodologies, on the economic analysis of labor and employment law. In addition to surveying the current state of the art on the economics of labor markets and employment relations, the volume’s 16 chapters assess aspects of traditional labor law and union organizing, the law governing the employment contract and termination of employment, employment discrimination and other employer mandates, restrictions on employee mobility, and the forum and remedies for labor and employment claims.
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Chapter 3: Economic analysis of labor markets and labor law: an institutional/industrial relations perspective

Bruce E. Kaufman


In the 20th century two intellectual traditions were the most influential in the American field of labor economics. The first was the tradition of institutional economics (IE) and its close offshoot industrial relations (IR), the second was the tradition of neoclassical economics (NE). This cleavage is refracted into the modern field of labor law where on one side is an IE/IR-oriented traditional approach to labor law (e.g., Deakin and Wilkinson 2005; Estlund 2006; Arthurs 2007) and, on the other, a largely NE-inspired law and economics (L & E) approach (Schwab 1997; Posner 2007; Medema 2010). The institutional economics/industrial relations (IE/IR) approach had its original home base at the University of Wisconsin and was led by John Commons; after the 1930s it evolved and expanded to include a neo-institutional branch centered in industrial relations and headed by non-Wisconsin labor economists such as John Dunlop, Clark Kerr, Richard Lester, and Lloyd Reynolds (McNulty 1980; Segal 1986; Kaufman 1988, 2006). Johnson (1975) refers to this tradition as the “old labor economics” and notes that it was partially separated from the main body of economics by its cross-disciplinary approach to theory-building, critical stance toward the competitive core of neoclassical theory, and neutral-to-sympathetic attitude toward trade unions and labor law. Other intellectual traditions, such as socio-economics, economic sociology, and comparative institutional analysis from political science, also feed into modern-day IE/IR.

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