Economic essence and evolution of the concept of “labour efficiency” in the context of institutional economics

Abstract

This paper investigates the economic essence and the evolutionary transformation of the concept of labour efficiency through the analytical lens of institutional economics. The study demonstrates that historically the interpretation of labour efficiency shifted from the classical and neoclassical focus on productivity and marginal returns toward broader theoretical frameworks that account for social norms, institutional coordination, bounded rationality, transaction costs, and behavioural determinants of individual work effort. Institutional, behavioural and technological transformations have increasingly revealed the limitations of mechanistic output–input interpretations of labour efficiency, particularly in knowledge‑intensive sectors. The article synthesizes contributions of various scientific schools – classical political economy, old and new institutionalism, neo‑institutionalism, and behavioural economics– to explain how institutions shape work incentives, influence the allocation of human capital and determine the realisation of intellectual and creative labour potential. Special attention is devoted to the higher education sector, in which labour outcomes are intangible, delayed over time, and highly dependent on organisational culture, academic integrity, governance mechanisms and autonomy of educational actors.
The study substantiates the need for composite assessment models combining quantitative indicators, qualitative characteristics, behavioural dimensions, resource adequacy and institutional validity, complemented by external market and societal validation of results. The findings confirm that institutional economics provides an advanced methodological framework for understanding and improving labour efficiency in modern organisations, especially within higher education, where preserving human capital and ensuring sustainable development are of critical national importance. The article also outlines institutional determinants, such as the quality of contracts, incentive structures, norms, and governance systems, as key drivers of effective utilisation of intellectual labour and proposes directions for further research aimed at designing institutionally sensitive and context‑appropriate performance management mechanisms.