Works councils – sand or grease in the operation of German firms?

Abstract

Using a large panel data set it is investigated whether works councils act as sand or grease in the operation of German firms. Stochastic production frontier analysis indicates that establishments with and without a works council do not exhibit significant differences in efficiency.

Notes

¹ Unfortunately information on the stock of capital is not available in the dataset.

² Indeed, the Hausman test statistic after a random effects regression of Equation 1 clearly rejects the hypothesis that the α _i are uncorrelated with the X-variables.

³ Since eastern German plants are included in the IAB Panel only since 1996, the balanced dataset covers only establishments from western Germany.