Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages

Olaf Hübler and Uwe Jirjahn

No 322, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates the interaction between establishment-level codetermination and industry-level collective bargaining in Germany. Based on a simple bargaining model we derive our main hypothesis: In establishments covered by collective bargaining agreements works councils are more likely to be engaged in productivity enhancing activities and less engaged in rent seeking activities than their counterparts in uncovered firms. Using data from German manufacturing establishments, our empirical analysis confirms this hypothesis. The presence of works councils exerts a positive impact on productivity within the covered industrial relations regime but not within the uncovered industrial relations regime. In contrast, the presence of works councils has a positive effect on wages within the uncovered industrial relations regime but not to the same degree within the covered industrial relations regime.

Keywords: Dual industrial relations; bargaining; efficiency; rent seeking; correlated double selection (search for similar items in EconPapers)
JEL-codes: D23 J24 J31 J51 J53 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2001-07
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (16)

Published - revised version published in: Scottish Journal of Political Economy, 2003, 50 (4), 471-491

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Journal Article: Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages (2003)
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