The temporal dimension of wage contracts in oligopoly with spillovers
preprintposted on 2007-03-30, 11:21 authored by Vasileios Zikos
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.
- Business and Economics
NotesThis is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_04.html.