Works Councils and Environmental Investment: Theory and Evidence from German Panel Data

39 Pages Posted: 11 Nov 2002

See all articles by Jan Erik Askildsen

Jan Erik Askildsen

University of Bergen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Uwe Jirjahn

University of Trier - Faculty of Economics

Stephen C. Smith

George Washington University - Department of Economics

Date Written: October 2002

Abstract

Firms may underinvest in local environmental protection even from the private viewpoint of its owners and employees, but works councils may help mitigate this problem. We show that increases in environmental investments when councils are present could be employee-led, firm-led, or jointly-led. We test these alternatives with German panel data using a random effects probit model, and find a strong and robust relationship between investments in improving local environmental quality and council activities. This effect is largest and most significant when the council is active in environmental matters, and when management views employee participation as productive. With the exception of product innovation, we generally do not find analogous effects on investments that reduce environmental impacts more remote from the workplace, or for other types of investment. We conclude that the higher environmental investments in establishments with councils are largely employee-led or jointly-led; but the significant effect of management attitudes toward participation suggests that genuine management-employee cooperation and the tradeoffs it implies is taking place.

JEL Classification: J53, I18, J32, K32

Suggested Citation

Askildsen, Jan Erik and Jirjahn, Uwe and Smith, Stephen C., Works Councils and Environmental Investment: Theory and Evidence from German Panel Data (October 2002). Available at SSRN: https://ssrn.com/abstract=348085

Jan Erik Askildsen (Contact Author)

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway
(+47)55589218 (Phone)
(+47)55589210 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Uwe Jirjahn

University of Trier - Faculty of Economics ( email )

Trier, 54286
Germany

Stephen C. Smith

George Washington University - Department of Economics ( email )

2115 G Street NW
306 Monroe Hall
Washington, DC 20052
United States

HOME PAGE: http://https://www2.gwu.edu/~iiep/about/faculty/ssmith/

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