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Timing of Wage Setting when Firms Invest in R&D

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  • Bárcena Ruiz, Juan Carlos
  • Campo Corredera, María Luz

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.

Suggested Citation

  • Bárcena Ruiz, Juan Carlos & Campo Corredera, María Luz, 2003. "Timing of Wage Setting when Firms Invest in R&D," IKERLANAK 2003-14, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  • Handle: RePEc:ehu:ikerla:5704
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    References listed on IDEAS

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    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
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    More about this item

    Keywords

    unions; R&D; productivity of labor; wage setting;

    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, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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