Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages

40 Pages Posted: 30 Jul 2001

See all articles by Olaf Hübler

Olaf Hübler

University of Hannover; IZA Institute of Labor Economics

Uwe Jirjahn

University of Trier - Faculty of Economics

Date Written: July 2001

Abstract

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.

Keywords: Dual Industrial Relations, Bargaining, Efficiency, Rent Seeking, Correlated Double Selection

JEL Classification: D23, J24, J31, J51, J53

Suggested Citation

Hübler, Olaf and Jirjahn, Uwe, Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages (July 2001). IZA Discussion Paper No. 322. Available at SSRN: https://ssrn.com/abstract=276511

Olaf Hübler (Contact Author)

University of Hannover ( email )

Institute of Quantitative Economic Research
D-30167 Hannover
Germany
+49 511 762 4794 (Phone)
+49 511 762 3923 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Uwe Jirjahn

University of Trier - Faculty of Economics ( email )

Trier, 54286
Germany

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