Codetermination, R&D, and Employment

Abstract

We examine whether the German system of codetermination affects output, industrial employment, and R+amp;D when firm asymmetry relies on different governance structures due to codetermination. Under a decision-making process shaped by utilitarian management, an intermediate degree of codetermination enables the codetermined firm to produce more output, hire more labor, and undertake more R+amp;D activities, but this is not ensured for any degree of codetermination. This contrasts with situations where codetermination goes forward through bargaining between shareholders and workers, where the codetermined firm is able to produce more output, hiring more labor, and undertaking more R+amp;D investments.

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