Ruhr Economic Papers

TU Dortmund, 03/2010, 45 S./p., 8 Euro, ISBN 978-3-86788-199-9

Abstract

This paper introduces a two-stage union-oligopoly-council model of wage and
employment determination wherein at the fi rst stage wage is negotiated through collective
bargaining and at the second stage employment in each fi rm is co-determined
by the employer and its works council. We provide a full characterization of the model
outcome for all parameter values of bargaining power and co-determination power.
In particular, works councils always increase employment while their impact on wage
can be non-monotonic. Overall, individual works councils’ pursuit of own workers’
interests may well harm the workers as a union.