The economic effects of works councils: channels and conditions. Using secondary data to test a new theoretical model

Abstract

German studies already have supported the existing positive economic effects of works councils, but failed to explain how these effects are produced. New case study based research from the Netherlands has provided a theory consisting of three channels to create economic impact, also including a set of necessary conditions. This article presents a secondary analysis of this theory with the use of a large data set. This quantitative analysis further supports the theory and contains interesting nuances about how the channels work, in particular about the role of the availability of sufficient works council candidates at elections.

Works council introductions in Germany: Do they reflect workers’ voice?

“…Studies on works councils hence investigate their effects on a variety of outcomes such as productivity (e.g. Mueller, 2012; Mueller and Stegmaier, 2014), wages (Addison et al, 2010), profits (Mueller, 2011), employment growth (Jirjahn, 2010), employment stability (Hirsch et al, 2010; Pfeifer, 2011a), apprenticeship training (Kriechel et al, 2014), job satisfaction (Grund and Schmitt, 2013), or look at several of these outcomes within one study (Addison et al, 2001; Hübler and Jirjahn, 2003; Jirjahn, 2014; Pfeifer, 2011b; Wigboldus et al, 2014). 1 Compared with this vast literature on existing councils (for surveys see Addison, 2009; Jirjahn, 2011), relatively few studies explicitly look at workers’ decision and motives to introduce a works council, which is the focus of the present investigation.…”