Economic Effects of Co-Determination
THE CHANGING CONTOURS OF GERMAN INDUSTRIAL RELATIONS, Walther Müller-Jentsch and Hansjörg Weitbrecht, eds., Munich and Mering, pp. 119-135, 2003
Posted: 23 Aug 2006
Co-determination is not only a political, social and legal issue, it is also an issue of great economic importance. However, there is no consensus what the economic effects of co-determination are. There are vehement proponents for and equally dedicated opponents against co-determination in the economic profession. Therefore, in the first two sections the main economic arguments for and against co-determination will be presented. In section 3 a special critique against mandatory co-determination will be analysed: If co-determination is economically (in the sense of Pareto) efficient, why is it not introduced voluntarily? Section 4 presents the most important rules of the co-determination laws in Germany. In Germany co-determination is a very important issue and Germany is also the country for which the most empirical research exists. There is special emphasis on the difference between board-level co-determination and plant-level co-determination by works councils, which is important for an empirical evaluation of the economic effects of co-determination. Section 5 contains the available empirical evidence, in particular, econometric evidence concerning the economic effects of board-level co-determination in Germany. Section 6 includes the same for plant-level co-determination.
Keywords: co-determination, corporate governance, Germany, works council
JEL Classification: J53, J83, K31, M54, B52
Suggested Citation: Suggested Citation