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German Works Councils and the Anatomy of Wages

  • John T. Addison
  • Paulino Teixeira
  • Thomas Zwick

Using matched employer-employee data from the German LIAB for 2001, the authors found that German works councils are in general associated with higher earnings, even after accounting for establishment- and worker heterogeneity. Works council wage premia exceed those of collective bargaining and are higher, in fact, where both institutions are present in the workplace. The authors also found evidence indicating that works councils benefit women relative to men and appear to favor foreign, east-German, and service-sector workers as well. Separate evidence from quantile regressions suggests that the conjunction of works council presence and collective bargaining is important to the narrowing process. In smaller plants even the presence of a works council markup depends on the coexistence of the works council entity with the machinery of collective bargaining.

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 63 (2010)
Issue (Month): 2 (January)
Pages: 247-270

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Handle: RePEc:ilr:articl:v:63:y:2010:i:2:p:247-270
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  1. 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.
  2. Joachim Wagner & Thorsten Schank & Claus Schnabel & John T. Addison, 2006. "Works Councils, Labor Productivity and Plant Heterogeneity: First Evidence from Quantile Regressions," GEMF Working Papers 2006-03, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Bernd Fitzenberger & Karsten Kohn & Alexander C. Lembcke, 2013. "Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 66(1), pages 169-197, January.
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  5. Farber, Henry S, 1994. "The Analysis of Interfirm Worker Mobility," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 554-93, October.
  6. Edward P. Lazear & Paul Oyer, 2007. "Personnel Economics," NBER Working Papers 13480, National Bureau of Economic Research, Inc.
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  8. Joan Muysken & Thomas Zwick, 2006. "Wage Divergence and Unemployment: The Impact of Wage Setting Power and Training Costs," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(1), pages 1-19.
  9. 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.
  10. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
  11. Bender, Stefan & Haas, Anette & Klose, Christoph, 2000. "IAB Employment Subsample 1975-1995 Opportunities for Analysis Provided by the Anonymised Subsample," IZA Discussion Papers 117, Institute for the Study of Labor (IZA).
  12. Gesine Stephan & Knut Gerlach, 2005. "Wage settlements and wage setting: results from a multi-level model," Applied Economics, Taylor & Francis Journals, vol. 37(20), pages 2297-2306.
  13. Gartner, Hermann & Stephan, Gesine, 2004. "How collective contracts and works councils reduce the gender wage gap," IAB Discussion Paper 200407, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  14. Richard B. Freeman, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits," NBER Working Papers 0242, National Bureau of Economic Research, Inc.
  15. Heinze, Anja & Wolf, Elke, 2006. "Gender Earnings Gap in German Firms: The Impact of Firm Characteristics and Institutions," ZEW Discussion Papers 06-20, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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