Works Councils and the Anatomy of Wages

48 Pages Posted: 2 Jan 2007

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

Paulino Teixeira

Universidade de Coimbra - Faculdade de Economia; Center for European Economic Research (ZEW)

Thomas Zwick

Centre for European Economic Research (ZEW); University of Würzburg - Business Administration & Economics; Maastricht University - Research Centre for Education and the Labour Market (ROA)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2006

Abstract

This paper provides the first full examination of the effect of German works councils on wages using matched employer-employee data (specifically, the LIAB for 2001). We find that works councils are associated with higher earnings. The wage premium is around 11 percent (and is higher under collective bargaining). This result persists after taking account of worker and establishment heterogeneity and the endogeneity of works council presence. Next, using quantile regressions, we find that the works council premium is decreasing with the position of the worker in the wage distribution. And it is also higher for women than for men. Finally, the works council wage premium is associated with longer job tenure. This suggests that some of the premium is a noncompetitive rent, even if works council voice may dominate its distributive effects insofar as tenure is concerned.

Keywords: matched employer-employee data, rent seeking, tenure, wages, wage distribution, works councils

JEL Classification: J31, J50

Suggested Citation

Addison, John T. and Teixeira, Paulino and Zwick, Thomas and Zwick, Thomas, Works Councils and the Anatomy of Wages (November 2006). IZA Discussion Paper No. 2474, Available at SSRN: https://ssrn.com/abstract=950921 or http://dx.doi.org/10.2139/ssrn.950921

John T. Addison (Contact Author)

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

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IZA Institute of Labor Economics

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Paulino Teixeira

Universidade de Coimbra - Faculdade de Economia ( email )

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Center for European Economic Research (ZEW) ( email )

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Thomas Zwick

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

University of Würzburg - Business Administration & Economics ( email )

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Wuerzburg, D-97070
Germany

Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )

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