Using a large panel data set we investigate 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.

German law guaranteeing works councils is not a datum. The thrust of legislation has changed significantly on a number of occasions since 1920. The most recent legal change in the form of the Works Constitution Reform Act marks a controversial swing in favor of works council formation and...

I use a question about works council relations from the 2006 wave of the IAB Establishment panel to analyze the heterogeneous effects of works councils on productivity, wages, and profits. The results indicate that the effects differ significantly between works council relationship types in a...

We estimate the effects of a mandate allocating a third of corporate board seats to workers (shared governance). We study a reform in Germany that abruptly abolished this mandate for certain firms incorporated after August 1994 but locked it in for the older cohorts. In sharp contrast to the...

This paper analyzes the role of works councils as gatekeepers safeguarding employee's interests in the adoption of monitoring practices. We first introduce a formal model predicting that (i) the introduction of monitoring practices leads to a stronger increase (or weaker decrease) in job...