Strategic Innovation with Complete and Incomplete Labour Market Contracts

A Ulph, David Ulph

    Research output: Contribution to journalArticlepeer-review

    24 Citations (Scopus)

    Abstract

    In a model of strategic R&D competition between two firms that negotiate with independent unions we show that: (i) incomplete labour market contracts may Pareto-dominate complete labour market contracts; (ii) even when complete contracts Pareto-dominate incomplete contracts, economies can get stuck in the incomplete contract equilibrium. These conclusions provide additional strategic reasons why complete labour market contracts may not be used-even if they were feasible. We propose two testable predictions to discriminate between complete and incomplete contracts: (i) the variance of wages is lower with complete contracts; (ii) the variance of employment is higher under complete contracts.

    Original languageEnglish
    Pages (from-to)265-282
    Number of pages18
    JournalScandinavian Journal of Economics
    Volume103
    Issue number2
    DOIs
    Publication statusPublished - Jun 2001

    Keywords

    • strategic innovation
    • complete contracts
    • incomplete contracts
    • unions
    • WAGES

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