Labor Law and Employment Regulation: Neoclassical and Institutional Perspectives

Abstract

This paper provides an in-depth economic analysis of the pros and cons of labor law and employment regulation. Two law and economics movements are identified in the USA: the first is the well-known post-World War II law and economics movement centered in neoclassical economics and the University of Chicago; the second is the largely unknown and neglected pre-World II law and economics movement centered in institutional economics and the University of Wisconsin. The former mostly provides the con side to employment regulation, the latter mostly provides the pro side. The paper describes the assumptions, methods and theories of each school of thought and their implications regarding the optimal form and extent of labor law and employment regulation.