In classical theory, the labour market operates as any other market, that is,
the supply and demand determines the equilibrium between wages and the number
of employees. The Keynesians went a step further by pointing out that the
labour market does not follow the same principle as other markets and that
wages do not change due to numerous rigidities, i.e. that the equilibrium is
not achieved with full employment. The neoclassical macroeconomics reverts to
the classical theory, noting that the labour market equilibrium is achieved
immediately. The weakness of these theories is that they do not sufficiently
consider specific features of the labour market and/or human labour. However,
the new Keynesians went a step further in this direction by developing the
efficiency wage model incorporating both economic and sociological
explanations in the labour market interpretation. Nevertheless, it seems that
there is still enough room for further improvements of this model and the
paper communicates certain suggestions to that end.
Human Capital Accumulation and Labour Market Equilibrium
