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Worker participation in decision-making, worker sorting, and firm performance

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  • Müller, Steffen
  • Neuschäffer, Georg

Abstract

Worker participation in decision-making is often associated with high-wage and high-productivity firm strategies. Using linked-employer-employee data for Germany and worker fixed effects from a two-way fixed effects model of wages capturing observed and unobserved worker quality, we find that establishments with formal worker participation via works councils indeed employ higher-quality workers. We show that worker quality is already higher in plants before council introduction and further increases after the introduction. Importantly, we corroborate previous studies by showing positive productivity and profitability effects even after taking into account worker sorting.

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  • Müller, Steffen & Neuschäffer, Georg, 2020. "Worker participation in decision-making, worker sorting, and firm performance," IWH Discussion Papers 11/2020, Halle Institute for Economic Research (IWH).
  • Handle: RePEc:zbw:iwhdps:112020
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    References listed on IDEAS

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    Cited by:

    1. Simon Jäger & Shakked Noy & Benjamin Schoefer, 2021. "What Does Codetermination Do?," NBER Working Papers 28921, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    works councils; worker sorting; worker quality; between-firm wage inequality; productivity; profits;
    All these keywords.

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • 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

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