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R&D Investments And Sequential Wage Negotiations

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  • JUAN CARLOS BÁRCENA‐RUIZ
  • M. LUZ CAMPO

Abstract

This paper analyses how the structure of wage bargaining affects R&D investment by firms that increases the productivity of labour in a Cournot duopoly. We find that total expenditure on R&D is greater when wages are set simultaneously than when they are set sequentially. Thus sequential wage negotiations reduce the incentive for firms to innovate and affect the productivity of labour. When wage negotiations are sequential the productivity of labour is greater (lower) in the follower (leader) firm than when negotiations are simultaneous. We also obtain that for same parameter values it is possible for the firm with the lower productivity to end up paying a higher wage than the firm with the higher level of labour productivity.

Suggested Citation

  • Juan Carlos Bárcena‐Ruiz & M. Luz Campo, 2009. "R&D Investments And Sequential Wage Negotiations," Australian Economic Papers, Wiley Blackwell, vol. 48(3), pages 183-202, September.
  • Handle: RePEc:bla:ausecp:v:48:y:2009:i:3:p:183-202
    DOI: 10.1111/j.1467-8454.2009.00370.x
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    Cited by:

    1. Choi, Kangsik, 2010. "The Timing of Endogenous Wage Setting under Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 20205, University Library of Munich, Germany.

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