Codetermination and Efficiency: Some Market Failure Arguments Revisted / Mitbestimmung und Effizienz: Einige Marktversagensargumente neu betrachtet

Summary In this paper the relationship between state-mandated codetermination and efficiency is examined. The paper starts from the theoretical point that there must be some market failure preventing freely contracting individuals from setting up efficient labour contracts. These market failures are identified as some forms of strategic behavior and externalities. In neither case codetermination can be regarded as a useful state intervention opening up productivity gains that couldn't be achieved by private action. The empirical evidence of Germany confirms this theoretical point.