ABSTRACT
This chapter examines the theories that were developed to explain wage determination and wage differentials. It illustrates the new path that was being forged for labor economics by institutionalist practitioners. Concepts such as segmented labor market theory, internal labor market theory, and theories of unions' effects on wage rates were developed in this era, and these theories continue to be mined today by analysts seeking to explain wage rate determination and differentials. The existence of wage differentials, not wage equality, was often the norm for similar types of labor, even in the same geographic area; in this sense, the study of wage determination and the study of wage differentials were two sides of the same coin. The postwar labor economists recognized the contradiction that was posed to mainstream theory by the empirical evidence of substantial wage differentials.
