Using a large panel data set it is investigated whether works councils act as a 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

Since 1920, the thrust of German law on workplace codetermination has changed on a number of occasions. We describe the latest swing of the legislative pendium - favoring works council formation and competence - and evaluate the case for it. We provide new information on the extent of works...