ABSTRACT
From the perspective of new institutional economics, changing labour relations can be understood by investigating the role of salient underlying social and legal norms and rules. Referred to as institutions, these social and legal constraints influence the individual behaviour of employers, employees and trade unions, and structure their complex interactions. This chapter reviews the body of economic literature covering these issues and examines the role that latent institutions play in transforming the labour market driven by the digital economy. Major labour market problems covered recently by new institutional economics include workplace representation, job security, uncertainty and asymmetric information, bargaining strength, strategic behaviour, transaction costs, property rights and organisational arrangement. The discussion covers the role of both formal (legal framework) and informal institutions (norms, customs). The final section of the chapter examines the strengths and limitations of the new institutional economics as an explanatory tool to understand the hierarchical, interrelated consequences of digital transformation on the labour market.
