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Separating Introduction Effects from Selectivity Effects: The Differences in Employment Patterns of Co-Determined Firms

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Author Info

  • Gralla, Rafael

    ()
    (TU Dortmund)

  • Kraft, Kornelius

    ()
    (TU Dortmund)

Abstract

This study examines differences in employment growth between firms with and without works councils by separating introduction effects from potential selectivity effects. Using a difference in differences framework, we show that firms with works councils have higher employment growth before establishing a works council. However, employment growth declines after introduction. We identify the reason for lower employment growth in reduced hiring rates but constant dismissal rates.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7022.

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Length: 31 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:iza:izadps:dp7022

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Keywords: works councils; hires; dismissals; employment growth; difference-in-differences;

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References

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  1. John T. Addison & Claus Schnabel & Joachim Wagner, 2004. "The Course of Research into the Economic Consequences of German Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 42(2), pages 255-281, 06.
  2. Uwe Jirjahn & Jens Mohrenweiser & Uschi Backes-Gellner, 2010. "Works Councils and Learning: On the Dynamic Dimension of Codetermination," Research Papers in Economics 2010-06, University of Trier, Department of Economics.
  3. FitzRoy, Felix R & Kraft, Kornelius, 1985. "Unionization, Wages and Efficiency: Theories and Evidence from the U.S. and West Germany," Kyklos, Wiley Blackwell, vol. 38(4), pages 537-54.
  4. Addison, John T. & Bellmann, Lutz & Schnabel, Claus & Wagner, Joachim, 2002. "The Long Awaited Reform of the German Works Constitution Act," IZA Discussion Papers 422, Institute for the Study of Labor (IZA).
  5. 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.
  6. Uwe Jirjahn, 2009. "The Introduction of Works Councils in German Establishments - Rent Seeking or Rent Protection?," British Journal of Industrial Relations, London School of Economics, vol. 47(3), pages 521-545, 09.
  7. Uwe Jirjahn, 2010. "Works councils and employment growth in German establishments," Cambridge Journal of Economics, Oxford University Press, vol. 34(3), pages 475-500.
  8. Carola M. Frege, 2002. "A Critical Assessment of the Theoretical and Empirical Research on German Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 40(2), pages 221-248, 06.
  9. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter.
  10. Hübler, Olaf & Jirjahn, Uwe, 2001. "Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages," IZA Discussion Papers 322, Institute for the Study of Labor (IZA).
  11. Birgit Schultz, 2006. "Mikrooekonometrische Evaluation der oekonomischen Wirkungen betrieblicher Mitbestimmung - Moeglichkeiten und Grenzen des Matching-Ansatzes," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(5), pages 519-536, September.
  12. Uwe Jirjahn & Kornelius Kraft, 2010. "Teamwork And Intra-Firm Wage Dispersion Among Blue-Collar Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(4), pages 404-429, 09.
  13. Fitzroy, Felix R & Kraft, Kornelius, 1987. "Efficiency and Internal Organization: Works Councils in West German Firms," Economica, London School of Economics and Political Science, vol. 54(216), pages 493-504, November.
  14. Uwe Jirjahn, 2008. "Works Councils and Employment Growth: - A Reply to Addison and Teixeira," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 15(4), pages 436 - 448.
  15. John T. Addison & Paulino Teixeira & Thomas Zwick, 2008. "German Works Councils and the Anatomy of Wages," Working Paper Series 11-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
  16. Michael Beckmann & Silvia Föhr & Matthias Kräkel, 2010. "Rent Seeking, Employment Security, and Works Councils: Theory and Evidence for Germany," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 62(1), pages 2-40, January.
  17. Uwe Jirjahn, 2011. "Ökonomische Wirkungen der Mitbestimmung in Deutschland: Ein Update," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 131(1), pages 3-57.
  18. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," The Journal of Business, University of Chicago Press, vol. 52(4), pages 469-506, October.
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Cited by:
  1. Oberfichtner, Michael, 2013. "Works council introductions: Do they reflect workers' voice?," Discussion Papers 83, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

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