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The Long Awaited Reform of the German Works Constitution Act

John Addison (), Lutz Bellmann (), Claus Schnabel () and Joachim Wagner ()
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Lutz Bellmann: Institute for Employment Research (IAB), Nuremberg

No 422, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: German law guaranteeing works councils is not a datum. The thrust of legislation has changed significantly on a number of occasions since 1920. The most recent legal change in the form of the Works Constitution Reform Act marks a controversial swing in favor of works council formation and authority. The present paper evaluates the new legislation from an economic perspective. We link the crucial terms of the new legislation to extant empirical evidence on the incidence of works councils, the availability of alternative employee involvement mechanisms, and the impact of the institution on performance by establishment size. Given the limitations of the evidence, which are shown to have relaxed the constraints on legislative innovation, we also offer some new empirical findings based on a matched-plants approach, using a nationally representative sample of establishments. This empirical strategy in principle offers improved estimates of the effects of works councils on establishment performance. Although the results of this exercise differ somewhat from earlier analyses, they provide little support for the recent legislative changes.

Keywords: works council legislation; codetermination; employee-involvement mechanisms; establishment performance; matched-plants approach (search for similar items in EconPapers)
JEL-codes: J24 J53 J58 K31 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2002-02
New Economics Papers: this item is included in nep-ent, nep-law and nep-pke
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Published in: Industrial Relations, 2004, 43 (2), 392-420

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