Works Councils and the Anatomy of Wages

John Addison (), Paulino Teixeira () and Thomas Zwick ()

No 2474, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: This paper provides the first full examination of the effect of German works councils on wages using matched employer-employee data (specifically, the LIAB for 2001). We find that works councils are associated with higher earnings. The wage premium is around 11 percent (and is higher under collective bargaining). This result persists after taking account of worker and establishment heterogeneity and the endogeneity of works council presence. Next, using quantile regressions, we find that the works council premium is decreasing with the position of the worker in the wage distribution. And it is also higher for women than for men. Finally, the works council wage premium is associated with longer job tenure. This suggests that some of the premium is a noncompetitive rent, even if works council voice may dominate its distributive effects insofar as tenure is concerned.

Keywords: matched employer-employee data; rent seeking; tenure; wages; wage distribution; works councils (search for similar items in EconPapers)
JEL-codes: J31 J50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2006-11
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Working Paper: Works councils and the anatomy of wages (2006)
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