Works Councils in the Production Process
This paper uses data from a nationally representative panel of establishments to estimate the effects of German works councils on firm performance, 1997-2000. We analyze the impact of this institution on sales and sales growth using OLS and fixed effect estimates of a translog production function as well as by employing a model in first differences. With cross-sectional and pooled data, the strong pro-productivity effects of works councils noted in the recent literature prove sensitive to disaggregation – most notably for plants with 21 to 100 employees, where the powers of the council are a datum – even if the coefficient estimates for the works council variable are often substantive. However, the fixed effects estimator yields much smaller works council effects that are (weakly) statistically significant in only one instance, while productivity changes do not differ between plants with and without a works council in the first differences specification. We conclude that reports of positive works council effects on productivity have been much exaggerated. That said, there is no evidence that works councils adversely affect firm performance, as suggested by earlier empirical literature based on small samples of firms.
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Volume (Year): 126 (2006)
Issue (Month): 2 ()
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References listed on IDEAS
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- Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-78, June.
- 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).
- Olaf H¸bler & Uwe Jirjahn, 2003. "Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 471-491, 09.
- Hirsch, Barry, 2003.
"What Do Unions Do for Economic Performance?,"
IZA Discussion Papers
892, Institute for the Study of Labor (IZA).
- 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.
- 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.
- FitzRoy, Felix R. & Kraft, Kornelius, 1995. "On the choice of incentives in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 26(1), pages 145-160, January.
- Freeman, Richard B, 1976. "Individual Mobility and Union Voice in the Labor Market," American Economic Review, American Economic Association, vol. 66(2), pages 361-68, May.
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