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Efficiency and Internal Organization: Works Councils in West German Firms

  • Fitzroy, Felix R
  • Kraft, Kornelius

Efficiency-voice theory has not explained why highly competent managers cannot maintain effective communication without formal or mandatory institutions of l abor's voice. Powerful West German works councils are negatively rela ted to productivity in the sample, suggesting that the best managers can do better without councils. However, excessive pressure on worker s should encourage both unionization and councils to gain compensatin g differentials, and the simultaneous WLS-Tobit estimates also suppor t this effect. General productivity benefits from formal voice organi zation are strongly rejected, but evaluating welfare, efficiency, and causality directly requires data on job satisfaction and managerial ability. Copyright 1987 by The Review of Economic Studies Limited.

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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 54 (1987)
Issue (Month): 216 (November)
Pages: 493-504

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Handle: RePEc:bla:econom:v:54:y:1987:i:216:p:493-504
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