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Flexible Collective Bargaining Agreements: Still a Moderating Effect on Works Council Behaviour?

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Abstract

We analyse the interaction between different labour market institutions in Germany, a country with a long tradition of strong bargaining partners. A number of studies have established that industry-level bargaining exerts a moderating role on firm-level co-determination: works councils generate rather than redistribute rents in plants covered by collective bargaining agreements. This work analyses whether these findings still hold, given recent developments in the German system of industrial relations towards more bargaining decentralisation, such as opening clauses or company-level pacts for employment. In addition, we provide evidence pertaining to whether labour market reforms targeted at one institution (a push of collective bargaining agreements towards more flexibility) are counteracted by altering the effects of other, unaffected institutions (the rent-seeking behaviour of works councils). Analysing institutional changes and augmenting a theoretical model provides hypotheses, which are then tested using empirical analysis of representative German plant level data. We find that the existence of flexibility provisions in collective bargaining agreements do not drive works council behaviour towards rent-seeking. Regarding rent-generation, we find an amplifying effect: works council existence is associated with higher productivity in plants covered by industry-level contracts. These findings, however, depend on the level of collective bargaining: they do not hold in plants covered by firm-level contracts.

Suggested Citation

  • Tobias Brändle, 2013. "Flexible Collective Bargaining Agreements: Still a Moderating Effect on Works Council Behaviour?," IAW Discussion Papers 96, Institut für Angewandte Wirtschaftsforschung (IAW).
  • Handle: RePEc:iaw:iawdip:96
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    1. Addison, John T. & Teixeira, Paulino & Zwick, Thomas, 2006. "Works Councils and the Anatomy of Wages," IZA Discussion Papers 2474, Institute for the Study of Labor (IZA).
    2. Uwe Jirjahn, 2011. "Ökonomische Wirkungen der Mitbestimmung in Deutschland: Ein Update," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 131(1), pages 3-57.
    3. Wagner Joachim & Schank Thorsten & Schnabel Claus & Addison John T., 2006. "Works Councils, Labor Productivity and Plant Heterogeneity: First Evidence from Quantile Regressions," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(5), pages 505-518, October.
    4. Brändle Tobias & Heinbach Wolf Dieter, 2013. "Opening Clauses in Collective Bargaining Agreements: More Flexibility to Save Jobs?," Review of Economics, De Gruyter, vol. 64(2), pages 159-192, August.
    5. Bernhard Boockmann & Susanne Steffes, 2010. "Workers, Firms, or Institutions: What Determines Job Duration for Male Employees in Germany?," ILR Review, Cornell University, ILR School, vol. 64(1), pages 109-127, October.
    6. Hirsch, Boris & Schank, Thorsten & Schnabel, Claus, 2009. "Work councils and separations: voice, monopoly, and insurance effects," Discussion Papers 62, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    7. Boris Hirsch & Steffen Mueller, 2012. "The Productivity Effect of Temporary Agency Work: Evidence from German Panel Data," Economic Journal, Royal Economic Society, vol. 122(562), pages 216-235, August.
    8. John T. Addison & Paulino Teixeira, 2005. "The Effect of Works Councils on Employment Change," GEMF Working Papers 2005-06, GEMF, Faculty of Economics, University of Coimbra.
    9. Helge Berger & Michael Neugart, 2012. "How German Labor Courts Decide: An Econometric Case Study," German Economic Review, Verein für Socialpolitik, vol. 13(1), pages 56-70, February.
    10. Bellmann Lutz & Gerlach Knut & Meyer Wolfgang, 2008. "Company-Level Pacts for Employment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 533-553, October.
    11. Steffen Mueller, 2008. "Capital stock approximation using firm level panel data," Working Papers 038, Bavarian Graduate Program in Economics (BGPE).
    12. Wolf Heinbach, 2007. "Wages in wage-setting regimes with opening clauses," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 1(3), pages 233-245, December.
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    Cited by:

    1. John T. Addison & Arnd Kölling & Paulino Teixeira, 2014. "Changes in Bargaining Status and Intra-Plant Wage Dispersion in Germany. A Case of (Almost) Plus Ça Change?," GEMF Working Papers 2014-15, GEMF, Faculty of Economics, University of Coimbra.
    2. Uwe Jirjahn, 2014. "Works Councils and Collective Bargaining in Germany: A Simple but Crucial Theoretical Extension," Research Papers in Economics 2014-13, University of Trier, Department of Economics.

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    Keywords

    works councils; collective bargaining; employment pacts; opening clauses; wages; productivity;

    JEL classification:

    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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