The productivity effect of non-union representation

Declining union density in many industrialized countries directs attention to alternative ways of labor relations and worker representation as, e.g., works councils. German works councils belong to the most powerful worker representations in developed countries but little is known of their causal effect on productivity. A large linked employer-employee panel is used to examine this issue. Comparing firms with and without a works council I find that firms with a works council are on average 6.5 percent more productive. I present evidence that this estimate is the lower bound to the causal productivity effect of works councils. -- worker participation ; works council ; productivity