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Do Works Councils Inhibit Investment?

Author

Listed:
  • John T. Addison
  • Thorsten Schank
  • Claus Schnabel
  • Joachim Wagner

Abstract

Theory suggests that firms confront a hold-up problem in dealing with workplace unionism: unions will appropriate a portion of the quasi-rents stemming from long-lived capital. As a result, firms may be expected to limit their exposure to rent-seeking by reducing investments. The U.S. evidence points clearly in this direction. The authors of this paper investigate whether the same is true for German works councils, the analogue of workplace unionism in that nation. Using establishment panel data for the years 1998–2003, they find no evidence that a works council's formation adversely affected investment or that its dissolution favorably affected investment.

Suggested Citation

  • John T. Addison & Thorsten Schank & Claus Schnabel & Joachim Wagner, 2007. "Do Works Councils Inhibit Investment?," ILR Review, Cornell University, ILR School, vol. 60(2), pages 187-203, January.
  • Handle: RePEc:sae:ilrrev:v:60:y:2007:i:2:p:187-203
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    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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