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Wages and Productivity Growth in a Dynamic Oligopoly

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  • Bester, Helmut
  • Milliou, Chrysovalantou
  • Petrakis, Emmanuel

Abstract

This paper studies the innovation dynamics of an oligopolistic industry. The firms compete not only in the output market but also by engaging in productivity enhancing innovations to reduce labor costs. Rent sharing may generate productivity dependent wage differentials. Productivity growth creates intertemporal spill-over effects, which affect the incentives for innovation at subsequent dates. Over time the industry equilibrium approaches a steady state. The paper characterizes the evolution of the industry's innovation behavior and its market structure on the adjustment path.

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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 287.

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Date of creation: Nov 2009
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Handle: RePEc:trf:wpaper:287

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Keywords: innovation; laborproductivity; oligopoly; wagedifferentials; productivitygrowth; industrydynamics;

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  1. James M. Malcomson, 1997. "Contracts, Hold-Up, and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1916-1957, December.
  2. Bester, Helmut & Petrakis, Emmanuel, 1998. "Wages and Productivity Growth in a Competitive Industry," CEPR Discussion Papers 2031, C.E.P.R. Discussion Papers.
  3. Hellwig, Martin & Irmen, Andreas, 2001. "Endogenous Technical Change in a Competitive Economy," Journal of Economic Theory, Elsevier, vol. 101(1), pages 1-39, November.
  4. Flaig, Gebhard & Stadler, Manfred, 1994. "Success Breeds Success. The Dynamics of the Innovation Process," Empirical Economics, Springer, vol. 19(1), pages 55-68.
  5. Helmut Bester & Emmanuel Petrakis, . "Wages and Productivity Growth in a Dynamic Monopoly," Papers 012, Departmental Working Papers.
  6. Ian Dew-Becker & Robert J. Gordon, 2008. "The Role of Labor Market Changes in the Slowdown of European Productivity Growth," NBER Working Papers 13840, National Bureau of Economic Research, Inc.
  7. Ulph, Alistair & Ulph, David, 1998. "Labour markets, bargaining and innovation," European Economic Review, Elsevier, vol. 42(3-5), pages 931-939, May.
  8. Chennells, Lucy & Van Reenen, John, 1997. "Technical Change and Earnings in British Establishments," Economica, London School of Economics and Political Science, vol. 64(256), pages 587-604, November.
  9. Menezes-Filho, Naercio & Ulph, David & Van Reenen, John, 1998. "The determination of R&D: Empirical evidence on the role of unions," European Economic Review, Elsevier, vol. 42(3-5), pages 919-930, May.
  10. Acs, Zoltan J. & Audretsch, David B., 1987. "Innovation in large and small firms," Economics Letters, Elsevier, vol. 23(1), pages 109-112.
  11. Doms, Mark & Dunne, Timothy & Troske, Kenneth R, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 253-90, February.
  12. Connolly, Robert A & Hirsch, Barry T & Hirschey, Mark, 1986. "Union Rent Seeking, Intangible Capital, and Market Value of the Firm," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 567-77, November.
  13. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
  14. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  15. Baldwin, Carliss Y, 1983. "Productivity and Labor Unions: An Application of the Theory of Self-Enforcing Contracts," The Journal of Business, University of Chicago Press, vol. 56(2), pages 155-85, April.
  16. Ulph, A. M. & Ulph, D. T., 1994. "Labour markets and innovation: Ex-post bargaining," European Economic Review, Elsevier, vol. 38(1), pages 195-210, January.
  17. Machin, Stephen & Wadhwani, Sushil, 1991. "The Effects of Unions of Investment and Innovation: Evidence from WIRS," Economic Journal, Royal Economic Society, vol. 101(405), pages 324-30, March.
  18. Tauman, Y & Weiss, Y, 1987. "Labor Unions and the Adoption of New Technology," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 477-501, October.
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