An Institutional Economic Analysis of Labor Unions

This paper uses institutional economic theory in the line of Commons and Coase to examine the purposes, economic effects, and social welfare consequences of labor unions. Cross‐discipline and cross‐national principles of the institutional paradigm are described, the American and European literatures are briefly juxtaposed, and the subject of unions is placed in a larger paradigm context. Relative to previous studies, this paper presents the most formal and analytically developed application of institutional theory to the subject of unions. A number of new or revisionist implications are developed, as are contrasts with neoclassical‐based models.