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Labour Relations Quality and Productivity: An Empirical Analysis on French Firms

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  • Gilbert Cette
  • Nicolas Dromel
  • Rémy Lecat

Abstract

We empirically characterise how good labour relations can alleviate the negative impact on productivity of regulatory constraints or workforce opposition. The estimates are based on a unique survey of French manufacturing firms collected by the Banque de France over the period 1991-2008. Our main results may be summarised as follows: i) ‘workforce or union opposition’ interacted with ‘regulatory constraints’ has a negative significant impact on total factor productivity (TFP). When this interaction is not taken into account, a deteriorated labour climate, through workforce or union opposition, weighs directly on TFP. But when this interaction is taken into account, this negative impact relies solely on the combination of regulatory constraints and labour opposition: workers or unions can successfully oppose management’s decisions and weigh on TFP when they can use or threaten to use appropriate regulation; otherwise, their opposition may be harmless; ii) ‘regulatory constraints’ interacted with ‘branch or firm agreement’ has a positive significant impact on TFP. These agreements, which can only be obtained if labour relations are supportive, would be used by firms to offset the negative impact of regulatory constraints. This favourable impact can be obtained through two channels: first, informally, a good labour climate can lead to a flexible implementation of regulation; second, formally, the French labour code incorporates provisions that allow firm or branch agreements to adapt or even alleviate the constraints of regulation. These results emphasise that the implementation of regulatory constraints and their impact on productivity crucially hinges on the quality of labour climate.

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Bibliographic Info

Article provided by Università di Perugia in its journal Review of Economics and Institutions.

Volume (Year): 4 (2013)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:pia:review:v:4:y:2013:i:2:n:2

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Keywords: labour relations; collective bargaining; trade unions; productivity;

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  1. Cahuc, Pierre & Algan, Yann & Aghion, Philippe, 2009. "Civil Society and the State: The Interplay between Cooperation and Minimum Wage Regulation," Scholarly Articles 3226957, Harvard University Department of Economics.
  2. S Black & L Lynch, 1997. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," CEP Discussion Papers dp0376, Centre for Economic Performance, LSE.
  3. Addison, John T., 2005. "The Determinants of Firm Performance: Unions, Works Councils, and Employee Involvement/High Performance Work Practices," IZA Discussion Papers 1620, Institute for the Study of Labor (IZA).
  4. John Addison & Stanley Siebert & Joachim Wagner & Xiangdong Wei, 2000. "Worker Participation and Firm Performance: Evidence from Germany and Britain," British Journal of Industrial Relations, London School of Economics, vol. 38(1), pages 7-48, 03.
  5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
  6. Addison, John T & Schnabel, Claus & Wagner, Joachim, 2001. "Work Councils in Germany: Their Effects on Establishment Performance," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 659-94, October.
  7. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(3), pages 355-78, June.
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