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Labor Economics
According to the MIT Dictionary of Modern Economics labor economics is the branch of economics that analyzes "the study of the nature and determinants of pay and employment." Particular emphasis is put on the role played by social institutions and different types of market structures that jointly determine the pattern and mobility or speed of adjustment in the labor market where human labor inputs are bought and sold.
With regard to their speed of adjustment, labor markets are relatively slow in comparison to those markets for nonlabor inputs and commodities. For reasons best attributed to human behavior, worker movement from relatively low-wage areas to high-wage locations is sluggish. Worker retraining aimed at eliminating wage differentials also requires a substantial amount of time, which is generally not the case for other nonlabor inputs and commodities. As a result, the duration of wage differentials has tended to outlast those of other price differentials.
Another prominent distinction is drawn between internal and external labor markets. Internal labor markets refer to the determinants of pay and employment within a firm, while external labor markets refer to the determinants of pay and employment between firms or within and across industries. Many labor economists place substantial theoretical weight on these distinctions when trying to explain how labor markets work. As to the question of which type is more efficient or inefficient in the allocation of labor however, unanimity has been absent.
General overview
Almost from its inception (and especially during the post-World War II period), the analytical scope of labor economics mushroomed far outside the domain of traditional economics, making it a difficult field to define in strict economic sense. Many labor economics specialists caution that the word "labor" should not be understood as exclusively linked to the discipline of "economics." Instead, they advocate a more interdisciplinary approach that draws critically from insights provided by the disciplines of sociology, political science, psychology, and organizational theory and behavior. As a result, labor economics has concerned itself with a large range of topics, including race and gender discrimination; labor-management relations; demographic economics; personal or social expenditures on education, medical care, and training, referred to as human capital investments; and a multitude of issues surrounding behavior in the workplace, a subject area germane to industrial and human relations schools.
During the last two decades of the twentieth century labor economics has been preoccupied with the problem of understanding and reversing a general economic productivity slowdown in the United States. As a proposed solution, a majority of labor economists and concerned others have recommended. . .