Opening Clauses in Collective Bargaining Agreements: More Flexibility to Save Jobs?

This paper analyses the impact of opening clauses in German collective bargaining agreements (CBAs) on job flows. Opening clauses should provide firms with more flexibility in economic crises. Therefore, firms operating under a CBA with opening clauses are expected to have lower job turnover, in particular lower job destruction under bad business conditions, and – if job creation is not adversely affected – higher job growth. We analyse this question empirically using data from the IAB Establishment Panel, a large and representative data set on German establishments. We supplement the data with additional information on the existence of opening clauses in CBAs in the West German manufacturing sector (using the IAW Data Set on Opening Clauses). By means of a matching approach, we address selection problems in flexible CBAs and reveal that the existence of opening clauses has a positive, albeit not always significant, effect on job growth. In contrast, there are no significant effects on job destruction and job creation per se, and, based on information given in the IAB Establishment Panel itself, explicit knowledge of opening clauses or their application have no additional effect on job flows.