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German Works Councils and The Anatomy of Wages

Author

Listed:
  • John T. Addison

    () (Department of Economics, Moore School of Business University of South Carolina, USA and The Rimini Centre for Economics Analysis, Rimini, Italy)

  • Paulino Teixeira

    () (Faculdade de Economia, Universidade de Coimbra, Potugal)

  • Thomas Zwick

    () (Centre for European Economic Research (ZEW),Mannheim, Germany)

Abstract

This paper provides the first comprehensive examination of the effect of German works councils on wages, using matched employer-employee data from the German LIAB for 2001. We find that works councils are associated with higher earnings: the wage premium is around 11 percent, and is higher under formal collective bargaining. This result persists after taking account of worker and establishment heterogeneity and the endogeneity of works council presence. Using quantile regressions, we further report that the works council premium is decreasing in the position of the worker in the wage distribution; and is higher for women than for men. Finally, the works council wage premium is associated with longer job tenure, which suggests that some of the premium is a noncompetitive rent. That said, it remains entirely possible that works council 'voice' may dominate its distributive effects, at least insofar as the tenure result is concerned.

Suggested Citation

  • John T. Addison & Paulino Teixeira & Thomas Zwick, 2007. "German Works Councils and The Anatomy of Wages," Working Paper series 13_07, Rimini Centre for Economic Analysis, revised Jul 2007.
  • Handle: RePEc:rim:rimwps:13_07
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    References listed on IDEAS

    as
    1. Bernd Fitzenberger & Karsten Kohn & Alexander C. Lembcke, 2013. "Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany," ILR Review, Cornell University, ILR School, vol. 66(1), pages 169-197, January.
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    4. Joan Muysken & Thomas Zwick, 2006. "Wage Divergence and Unemployment: The Impact of Wage Setting Power and Training Costs," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(1), pages 1-19.
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    8. John T. Addison & Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006. "Works Councils in the Production Process," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(2), pages 251-283.
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    10. Addison, John T & Schnabel, Claus & Wagner, Joachim, 2001. "Work Councils in Germany: Their Effects on Establishment Performance," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 659-694, October.
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    More about this item

    Keywords

    matched employer-employee data; rent seeking; tenure; wages; wage distribution; works councils; collective bargaining;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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