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Cambridge Journal of Economics Advance Access published online on April 21, 2009
Cambridge Journal of Economics, doi:10.1093/cje/bep012
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© The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Works councils and employment growth in German establishments

Uwe Jirjahn*

* Faculty of Economics, Leibniz University of Hanover, Germany

Address for correspondence: Privatdozent Dr Uwe Jirjahn, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät, Institut für Arbeitsökonomik, Königsworther Platz 1, 30167 Hannover, Germany; email: jirjahn{at}mbox.iqw.uni-hannover.de

Using data from German manufacturing establishments, this article examines the relationship between works councils and employment growth. Taking the endogeneity of councils into account, the estimates show a positive growth effect of works councils. This suggests that the performance-enhancing voice role of German works councils dominates their monopoly role. Moreover, the findings of this study support the hypothesis that workers are more likely to implement a council to protect their quasi-rents when the establishment is facing a long-term crisis.

Key Words: Works councils • Co-determination • Unions • Employment

JEL classifications: J23, J51, J53

Manuscript received May 20, 2008; final version received March 11, 2009.


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