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Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages

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  • Olaf H¸bler
  • Uwe Jirjahn

Abstract

This paper investigates the interaction between establishment-level codetermination and industry-level collective bargaining in Germany. Based on a bargaining model, we derive our main hypothesis: In establishments covered by collective bargaining agreements, works councils are more likely to be engaged in productivity-enhancing activities and less engaged in rent-seeking activities than their counterparts in uncovered establishments. Our empirical analysis confirms this hypothesis. The presence of works councils exerts a positive impact on productivity within the covered industrial relations regime but not within the uncovered regime. The presence of works councils has a positive effect on wages within the uncovered regime but not to the same degree within the covered regime. Copyright (c) Scottish Economic Society 2003.

Suggested Citation

  • 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, September.
  • Handle: RePEc:bla:scotjp:v:50:y:2003:i:4:p:471-491
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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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