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.

This paper measures the productivity impact of management-led participative establishment practices. On the basis of a representative German establishment data set, the IAB establishment panel, the study finds that the presence of team-work, a reduction of hierarchies and autonomous work groups...