The Making of the German Model of Industrial Relations

This paper studies how collective bargaining institutions emerged from competition within the labor movement. We draw on newly assembled data on strikes, union membership, and bargaining agreements at the county-occupation level in Imperial Germany around 1900. Three rival factions competed for control of the labor movement: the social-democratic Free Trade Unions, the radical unions, and the moderate unions, divided over whether to confront employers, negotiate with them, or both. The Free Trade Unions struck more effectively than the radical unions and bargained far more than the moderate ones. Instrumenting Free Trade Union strength with distance to their headquarters, we show that stronger organization raised the likelihood that agreements emerged. Strike activity rose ahead of first agreements and fell thereafter. The effect is concentrated in multi-employer agreements with peace obligations, the bargaining form that later defined the German model. Organized employers played little part in this process. Durable bargaining institutions emerged where a movement could both sustain conflict and commit to settling it.