German Works Councils in the Production Process

John Addison, Thorsten Schank, Claus Schnabel and Joachim Wagner ()

No 812, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In a sharp break with past German research, some recent estimates have suggested that plants with work councils have 25 to 30 per cent higher productivity than their works-councilfree counterparts. Such findings can only serve to buttress the strong theoretical and policy interest in the German institution, not least in an environment of union decline. In the present paper, we estimate the effects of works councils on productivity, 1997-2000, using a nationally representative German data set. We recoup the works council effect by estimating translog production functions, stochastic frontier production functions, and a model in first differences. Once we focus on a core sample of establishments with 21 to 100 employees in which the powers of the works council are a datum, it emerges that the positive productivity differential is a chimera. By the same token, neither is the effect negative. This result is important in its own right given the sharply opposing findings of past empirical research and the partisan positions these have helped sustain.

Keywords: production functions; works councils; Germany; panel data (search for similar items in EconPapers)
JEL-codes: J50 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2003-06
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Citations: View citations in EconPapers (17)

Published - published in: Schmollers Jahrbuch: Zeitschrift für Wirtschafts- und Sozialwissenschaften/Journal of Applied Social Science Studies, 2006, 126 (2), 251-283

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