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Works Councils in the Production Process

Author

Listed:
  • John T. Addison

    (University of South Carolina (U.S.A.), GEMF/Universidade de Coimbra (Portugal) and IZA (Germany))

  • Thorsten Schank

    (Volkswirtschaftliches Institut, Friedrich-Alexander-Universität Erlangen-Nürnberg)

  • Claus Schnabel

    (Volkswirtschaftliches Institut, Friedrich-Alexander-Universität Erlangen-Nürnberg)

  • Joachim Wagner

    (Institut für Volkswirtschaftslehre, Universität Lüneburg, HWWA and IZA)

Abstract

This paper uses data from a nationally representative panel of establishments to estimate the effects of German works councils on firm performance, 1997-2000. We analyze the impact of this institution on sales and sales growth using OLS and fixed effect estimates of a translog production function as well as by employing a model in first differences. With cross section and pooled data, the strong pro-productivity effects of works councils noted in the recent literature prove sensitive to disaggregation – most notably for plants with 21 to 100 employees, where the powers of the council are a datum – even if the coefficient estimates for the works council variable are often substantive. However, the fixed effects estimator yields much smaller works council effects that are (weakly) statistically significant in only one instance, while productivity changes do not differ between plants with and without a works council in the first differences specification. We conclude that reports of positive works council effects on productivity have been much exaggerated. That said, there is no evidence that works councils adversely affect firm performance, as suggested by an earlier empirical literature based on small samples of firms.

Suggested Citation

  • John T. Addison & Thorsten Schank & Claus Schnabel & Joachim Wagner, 2005. "Works Councils in the Production Process," GEMF Working Papers 2005-12, GEMF, Faculty of Economics, University of Coimbra.
  • Handle: RePEc:gmf:wpaper:2005-12
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    References listed on IDEAS

    as
    1. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-378, June.
    2. Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52, National Bureau of Economic Research, Inc.
    3. John T. Addison & Claus Schnabel (ed.), 2003. "International Handbook of Trade Unions," Books, Edward Elgar Publishing, number 2705.
    4. Olaf Hübler & 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.
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    More about this item

    Keywords

    strike;

    JEL classification:

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

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