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The Temporal Dimension of Wage Contracts in Oligopoly with Spillovers

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Abstract

This paper examines how the duration of wage contracts influences innovation incentives, wages and employment. We find that wages are non-monotone in the duration of wage contracts. Furthermore, a positive and one-to-one relation between innovation and union utility exists and both attain their highest value under a long-term contract. Profits may vary depending on the extent of R&D spillovers and the associated raising rivals' cost incentive, although they are highest when union/firms engage in a long-term contractual relation. Testable predictions to discriminate between short-term and long-term contracts are also discussed.

Suggested Citation

  • Vasileios Zikos, 2007. "The Temporal Dimension of Wage Contracts in Oligopoly with Spillovers," Discussion Paper Series 2007_04, Department of Economics, Loughborough University, revised Feb 2007.
    • Handle: RePEc:lbo:lbowps:2007_04
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    References listed on IDEAS

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    More about this item

    Keywords

    Wage contracts; R&D; Spillovers; Raising rivals' cost.;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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