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Timing of Wage Setting when Firms Invest in R&D

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Author Info
Juan Carlos Bárcena Ruiz () (Facultad de Ciencias Económicas y Empresariales. UPV)
María Luz Campo Corredera () (Facultad de Ciencias Económicas y Empresariales. UPV)

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Abstract

In this paper, we analyze the effect that the timing of wage setting (i. e. whether wages set sequentially or simultaneously) has on the investment in R&D of firms, when that investment increases the productivity of labor, in the context of a Cournot duopoly. Contrary to the result obtained in the literature on wage bargaining, we obtain that unions may choose to set wages simultaneously. This is obtained if the size of the market is small enough and the efficiency of the R&D technology is great enought. It is in this case that firms spend most on R&D. By contrast, when unions choose to set wages sequentially, spending by firms on R&D is at its lowest.

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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 200314.

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Date of creation: 19 Dec 2003
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Handle: RePEc:ehu:biltok:200314

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Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Related research
Keywords: Unions; R&D; productivity of labor; wage setting;

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Find related papers by JEL classification:
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, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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