Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages
University of Hannover; Institute for the Study of Labor (IZA)
University of Trier - Faculty of Economics
IZA Discussion Paper No. 322
This paper investigates the interaction between establishment-level codetermination and industry-level collective bargaining in Germany. Based on a simple bargaining model we derive our main hypothesis: In establishments covered by collective bargaining agreements works councils are more likely to be engaged in productivity enhancing activities and less engaged in rent seeking activities than their counterparts in uncovered firms. Using data from German manufacturing establishments, our empirical analysis confirms this hypothesis. The presence of works councils exerts a positive impact on productivity within the covered industrial relations regime but not within the uncovered industrial relations regime. In contrast, the presence of works councils has a positive effect on wages within the uncovered industrial relations regime but not to the same degree within the covered industrial relations regime.
Number of Pages in PDF File: 40
Keywords: Dual Industrial Relations, Bargaining, Efficiency, Rent Seeking, Correlated Double Selection
JEL Classification: D23, J24, J31, J51, J53working papers series
Date posted: July 30, 2001
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