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Title:The Long Awaited Reform of the German Works Constitution Act PDF Logo
Authors:Addison, John T.
Bellmann, Lutz
Schnabel, Claus
Wagner, Joachim
Issue Date:2002
Series/Report no.:IZA Discussion paper series 422
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.
Subjects:works council legislation
codetermination
employee-involvement mechanisms
establishment performance
matched-plants approach
JEL:K31
J58
J53
J24
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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