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Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages

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  • Hübler, Olaf

    () (Leibniz University of Hannover)

  • Jirjahn, Uwe

    () (University of Trier)

Abstract

This paper investigates the interaction between establishment-level codetermination and industry-level collective bargaining in Germany. Based on a simple bargaining model we derive our main hypothesis: In establishments covered by collective bargaining agreements works councils are more likely to be engaged in productivity enhancing activities and less engaged in rent seeking activities than their counterparts in uncovered firms. Using data from German manufacturing establishments, our empirical analysis confirms this hypothesis. The presence of works councils exerts a positive impact on productivity within the covered industrial relations regime but not within the uncovered industrial relations regime. In contrast, the presence of works councils has a positive effect on wages within the uncovered industrial relations regime but not to the same degree within the covered industrial relations regime.

Suggested Citation

  • Hübler, Olaf & Jirjahn, Uwe, 2001. "Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages," IZA Discussion Papers 322, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp322
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    Keywords

    Dual industrial relations; bargaining; efficiency; rent seeking; correlated double selection;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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