Non-union worker representation, foreign owners, and the performance of establishments

Abstract

Using German establishment data, this study provides the first econometric analysis on the interaction of establishment-level codetermination and foreign owners. Works councils are associated with higher productivity in domestic-owned establishments while they are associated with lower productivity in foreign-owned establishments. Our results conform to the notion that foreign ownership can involve strong tensions with the institutional patterns of the host country.JEL classifications: J53, J54, M54.

Why is there resistance to works councils in Germany? An economic perspective

“…In smaller establishments having less than 100 employees, partly due to the smaller scope of powers conceded by law for these establishments, the positive effect cannot always be substantiated (Addison et al, 2001). More recent studies (Müller, 2011;Jirjahn and Müller, 2014), in contrast, find smaller but still positive effect in smaller establishments. In addition, great importance is attached to collective bargaining coverage.…”

“…More recent studies published since the last comprehensive literature review (Jirjahn, 2011) support the conclusion that correlations between the works council and productivity are largely positive (Brändle, 2013;Hübler, 2015;Jirjahn and Müller, 2014;Müller, 2012Müller, , 2015Pfeifer, 2011). To obtain a complete picture, however, two points must be taken into account:…”

Variable Pay, Industrial Relations and Foreign Ownership: Evidence from Germany

“…More pointedly, a series of case studies emphasize that cooperation between managers and works councils is less likely when the establishment has foreign ownership (Mueller 1998, Raess and Burgoon 2006, Royle 1998, Wever 1995. Indeed, Jirjahn and Mueller (2011) show that cooperative relationships are harder to achieve in foreign owned establishments and estimate a negative interaction effect of works councils and foreign ownership on productivity. In the next section we argue that a similar interaction effect may exist when estimating the use of variable pay.…”

Active Owners and the Failure of Newly Adopted Works Councils

“…Finally, we follow previous studies on works councils (e.g., Addison et al 1997, 2001, Gartner et al 2013, Huebler 2003, Jirjahn 2003, Jirjahn and Mueller 2013, Wagner 2008) and exclude very small and very large establishments from the analysis in order to focus on medium sized establishments. We experiment with different definitions of medium sized establishments and provide estimates for establishments with 21 to 100, 21 to 200, and 21 to 500 employees.…”