Productivity and Distribution Effects of Codetermination in an Efficient Bargaining

28 Pages Posted: 26 Oct 2017

See all articles by Kornelius Kraft

Kornelius Kraft

University of Dortmund - Department of Economics; IZA Institute of Labor Economics

Date Written: 2017

Abstract

Codetermination can be regarded as an extreme regulatory intervention of the legislator in the labor market which might affect the efficiency of production and the bargaining power of labor. Based on a model that covers both efficient bargaining and employment bargaining a simple equation is derived that is suited to empirical testing. The empirical test is based on German data and includes years before and after the extension of German codetermination law in 1976. The estimates determine the productivity of labor and relative bargaining power of capital and labor. It turns out that codetermination does not affect productivity, but leads to a significant increase in workers’ bargaining power and the distribution of rents.

Keywords: Codetermination, Productivity, Wage-Bill Share, Bargaining

JEL Classification: L22, L23, J52, J53

Suggested Citation

Kraft, Kornelius, Productivity and Distribution Effects of Codetermination in an Efficient Bargaining (2017). ZEW - Centre for European Economic Research Discussion Paper No. 17-039, Available at SSRN: https://ssrn.com/abstract=3059484 or http://dx.doi.org/10.2139/ssrn.3059484

Kornelius Kraft (Contact Author)

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany
+49 231 755-3152 (Phone)
+49 231 755-3155 (Fax)

IZA Institute of Labor Economics

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

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