The Long Awaited Reform of the German Works Constitution Act

45 Pages Posted: 8 Feb 2002

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Lutz Bellmann

Institute for Employment Research (IAB); Institute for the Study of Labor (IZA)

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

Date Written: February 2002

Abstract

German law guaranteeing works councils is not a datum. The thrust of legislation has changed significantly on a number of occasions since 1920. The most recent legal change in the form of the Works Constitution Reform Act marks a controversial swing in favor of works council formation and authority. The present paper evaluates the new legislation from an economic perspective. We link the crucial terms of the new legislation to extant empirical evidence on the incidence of works councils, the availability of alternative employee involvement mechanisms, and the impact of the institution on performance by establishment size. Given the limitations of the evidence, which are shown to have relaxed the constraints on legislative innovation, we also offer some new empirical findings based on a matched-plants approach, using a nationally representative sample of establishments. This empirical strategy in principle offers improved estimates of the effects of works councils on establishment performance. Although the results of this exercise differ somewhat from earlier analyses, they provide little support for the recent legislative changes.

Keywords: Works Council Legislation, Codetermination, Employee-involvement Mechanisms, Establishment Performance, Matched-plants Approach

JEL Classification: J24, J53, J58, K31

Suggested Citation

Addison, John T. and Bellmann, Lutz and Schnabel, Claus, The Long Awaited Reform of the German Works Constitution Act (February 2002). IZA Discussion Paper No. 422. Available at SSRN: https://ssrn.com/abstract=299682

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States
803-777-7400 (Phone)
803-777-6876 (Fax)

HOME PAGE: http://mooreschool.sc.edu/moore/economics/profiles/addison.htm

IZA Institute of Labor Economics

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

Lutz Bellmann

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany
+49 911 179 3046 (Phone)
+49 911 179 3297 (Fax)

Institute for the Study of Labor (IZA)

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

Claus Schnabel

University of Erlangen-Nuremberg ( email )

Institut für Wirtschaftsforschung
Lange Gasse 20
D-90403 Nuernberg
Germany
+49 911 5302 330 (Phone)
+49 911 5302 721 (Fax)

HOME PAGE: http://https://www.arbeitsmarkt.rw.fau.de/english-version/staff/prof-dr-claus-schnabel/

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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