Today unemployment and related socio-economic problems are perceived by the society as particularly painful.
Therefore, the issues of the effective functioning of the labor market are particularly prominent. Due to these challenges, the issue of development of institutions is becoming more and more urgent, which is confirmed by the experience of advanced countries of the world.
With purpose to study the labor market institutions, this paper uses Douglas North’s division of institutions into formal and informal institutions.
The paper considers the institutions as an economic category and discusses the role of the formal and informal institutions in the functioning of the labor market, and the peculiarities of the functioning of labor market institutions in Georgia.
As this study confirms, labor market formal and informal institutions are closely connected with other institutions and changes in one area affect other areas. Therefore, economic decisions should take into account the interests of all areas as much as possible. In addition, the state have to give priority to formal institutions in the functioning of the labor market, since the existence of informal institutions in Georgia is characterized by shortcomings and in many cases injustice.
The institutional development of the labor market in Georgia is characterized by a number of peculiarities: the connection between institutions of different fields is characterized by instability and does not have a complex approach at the state level; A changing political course changes the agenda and undermines the importance of institutions; Informal institutions of the labor market are mostly characterized by shortcomings, which are widespread among the population of Georgia and have deep historical roots.
