The Temporal Dimension of Wage Contracts in Oligopoly with Spillovers

Vasileios Zikos

Discussion Paper Series from Department of Economics, Loughborough University

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.

Keywords: Wage contracts; R&D; Spillovers; Raising rivals' cost. (search for similar items in EconPapers)
JEL-codes: J41 J51 L13 O31 (search for similar items in EconPapers)
Date: 2007-02, Revised 2007-02
New Economics Papers: this item is included in nep-bec, nep-ipr, nep-pr~ and nep-mic
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