The Productivity Effect of Non-Union Representation

Abstract

Declining union density in many industrialized countries directs attention to alter-native ways of labor relations and worker representation as, e.g., works councils. German works councils belong to the most powerful worker representations in de-veloped countries but little is known of their causal effect on productivity. A large linked employer-employee panel is used to examine this issue. Comparing firms with and without a works council I find that firms with a works council are on average 6.5 percent more productive. I present evidence that this estimate is the lower bound to the causal productivity effect of works councils.

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