A review of the literature in economics reveals weaknesses in the normally accepted neoclassical theory of the labor market, a problem that can be remedied with a new approach presented here, based on efficiency wage theory. The new model is applied to three independent data sets collected in the Netherlands in 1952, 1983, & 1988 (data not defined). In contrast to the neoclassical prediction that wage differentials are determined by supply & demand, efficiency wage theory shows that the nature of the employer is the deciding factor. The relevance of the model for unemployment, discrimination, contractual obligations, & disabilities is discussed. 3 Tables, 18 References. Adapted from the source document.
