Works councils and employment growth in German establishments

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. Copyright The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.