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Works councils and the anatomy of wages

Author

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  • Addison, John T.
  • Teixeira, Paulino
  • Zwick, Thomas

Abstract

This paper provides the first full examination of the effect of German works councils on wages using matched employer-employee data (specifically, the LIAB for 2001). We find that works councils are associated with higher earnings. The wage premium is around 11 percent (and is higher under collective bargaining). This result persists after taking account of worker and establishment heterogeneity and the endogeneity of works council presence. Next, using quantile regressions, we find that the works council premium is decreasing with the position of the worker in the wage distribution. And it is also higher for women than for men. Finally, the works council wage premium is associated with longer job tenure. This suggests that some of the premium is a noncompetitive rent, even if works council voice may dominate its distributive effects insofar as tenure is concerned.

Suggested Citation

  • Addison, John T. & Teixeira, Paulino & Zwick, Thomas, 2006. "Works councils and the anatomy of wages," ZEW Discussion Papers 06-086, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:5479
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    References listed on IDEAS

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    1. John T. Addison & Claus Schnabel & Joachim Wagner, 2004. "The Course of Research into the Economic Consequences of German Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 42(2), pages 255-281, June.
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    11. Alda, Holger, 2005. "Datenbeschreibung der Version 1 des LIAB-Längsschnittmodells (LIAB Longitudinal Model Version 1 - Data Description)," FDZ Datenreport. Documentation on Labour Market Data 200503_de, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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    21. Addison, John T. & Bellmann, Lutz & Schnabel, Claus & Wagner, Joachim, 2002. "The Long Awaited Reform of the German Works Constitution Act," IZA Discussion Papers 422, Institute of Labor Economics (IZA).
    22. John T. Addison & Paulino Teixeira, 2005. "The Effect of Works Councils on Employment Change," GEMF Working Papers 2005-06, GEMF, Faculty of Economics, University of Coimbra.
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    More about this item

    Keywords

    matched employer-employee data; rent seeking; tenure; wages; wage distribution; works councils;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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