8 - Post-war Developments in Labour Economics

Abstract

Labor economics only exists when labor market events are analyzed by abstract economic concepts such as demand, supply, market price, and choice. But these abstract concepts conceal other aspects in the labor market: trade-unions, strikes, negotiations, social laws, and the importance of working conditions. This chapter describes the developments that have presented themselves in the neoclassical approach. The development and elaboration of the neoclassical model for the labor market took place in three waves: (1) in the first wave, the static model is filled in, (2) in the second wave, the neoclassical model is made dynamic, and (3) in the third and last wave, uncertainty and lack of information is taken into account. One of the most important developments in labor economics in the postwar period is the econometric composition of traditional neoclassical supply and demand functions. The estimation of supply functions has taken a huge flight. A second striking phenomenon in this period is the continuing shift of the limits and the applications of the neo-classical models of choice. In this period, the field of household economics is extended, among other things, with decisions on the number of children, civil status, and household production. The supply of labor has both quantitative and qualitative dimensions and short-term and long-term aspects. Classical economists mostly had an eye for long-term aspects. In the neoclassical model, commodity demand and labor supply are directly related.