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Socially - optimal level of co-determination of labor and the European directive on workers' councils


  • Josheski, Dushko


In the past employee interest and influence have been presented mainly through trade unions and collective bargaining (economic regulation). Socially optimal levels of co-determination may be prevented by the existence of high fixed costs of establishing councils. Job security can resolve the adverse selection problem and raise economic efficiency i.e. worker or agent will work efficiently or socially optimal. Co-determination reinforces well functioning social democracy, recent studies discover that consultation and participation increase than innovativeness of the company. The US and EU approach to employment are different under common and civil law, that differ in many ways. The US employment –at- will is liberal individualist model, laissez-faire approach and any regulation is considered to be potentially welfare reducing. And mandatory employment rights model; EU model that seeks it’s rationale in the previously mentioned market failures (agency problems, hold-up problems) caused by asymmetric information and incomplete employment contracts, and the presence of monopolies, monopsonies that reduce workers mobility. Harmonious relations between” social partners” – labor and management are the aim of the European Work Council directive. European law continues to focus on workers and shareholders interest.

Suggested Citation

  • Josheski, Dushko, 2012. "Socially - optimal level of co-determination of labor and the European directive on workers' councils," MPRA Paper 38196, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38196

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    References listed on IDEAS

    1. Felix FitzRoy & Kornelius Kraft, 2005. "Co-determination, Efficiency and Productivity," British Journal of Industrial Relations, London School of Economics, vol. 43(2), pages 233-247, June.
    2. Riccardo Peccei & Helen Bewley & Howard Gospel & Paul Willman, 2005. "Is It Good to Talk? Information Disclosure and Organizational Performance in the UK," British Journal of Industrial Relations, London School of Economics, vol. 43(1), pages 11-39, March.
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    More about this item


    Asymmetric informations; European model; Employee councils; Co-determination; European Work Council Directive;

    JEL classification:

    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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