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Investment under company-level pacts before and during the Great Recession

Author

Listed:
  • Lutz Bellmann

    (Institute for Employment Research, Germany)

  • Hans-Dieter Gerner

    (Institute for Employment Research, Germany)

  • Olaf Hübler

    (University of Hannover, Germany)

Abstract

Company-level pacts between the management and the works council are often preferred in comparison to agreements between employers’ association and unions because the former negotiating partners are better informed about the economic situation of a company and have fewer goal conflicts than the latter. Moreover, these company-level pacts might reduce the ‘hold-up’ problems which arise once specialized investment is made. Therefore, this article investigates whether such agreements affect firm-level investment. Based on the IAB Establishment Panel Survey 2001–2010 the study indicates that the adoption of a company-level pact leads to a higher investment rate than in other firms driven by reinvestment. However, the Great Recession has damped this positive influence. From the econometric analysis the article does not detect any increase in investment during the negotiation phase. After the expiration of a company-level pact, lower reinvestment and a small increase in net investment take place.

Suggested Citation

  • Lutz Bellmann & Hans-Dieter Gerner & Olaf Hübler, 2015. "Investment under company-level pacts before and during the Great Recession," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 36(3), pages 501-522, August.
    • Handle: RePEc:sae:ecoind:v:36:y:2015:i:3:p:501-522
    DOI: 10.1177/0143831X13511999
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