Ruhr Economic Papers

Ruhr Economic Papers #178

Wage and Employment Effects of Workplace Representation – A ”Right To Co-Manage” Model

by Yiquan Gu

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



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.

JEL-Classification: J50, J54, L13

Keywords: Workplace representation; union-oligopoly bargaining; fi rm-council codetermination