Question

LABOR ECONOMICS - What insight(s) does the institutional school of thought bring the study of the labor market?

Answer 1

Key features of the Institutional School

• Marketing institutions refer to those who do the work of marketing, usually marketing middlemen. Weld (1916) is regarded as the founding father of this school based on his discussion of the value of specialised middlemen (in farm products, where there was a perception at the time that retail prices for agricultural products were unjustifiably high, after all, people who now lived in cities were used to buying farm products directly for much lower prices).
• The Institutional School is therefore very much concerned with the study of the channels of distribution. When producers become separated from consumers because of the division of labour there is potential for marketing. As specialisation increases, the division of labour becomes greater, the gaps become wider and the network of potential trading relationships becomes more complex. Middlemen have the potential to bridge these gaps.

A school of thought in labor economics that emphasizes imperfections in the market mechanism and the importance of institutional and sociological forces.

Institutional Forces

The forces influence that organizations such as unions, corporations, and government have on the pricing and distribution of labor.