Wage and employment effects of workplace representation: a "Right To Co-Manage" model

Abstract

This paper introduces a two-stage union-oligopoly-council model of wage and employment determination wherein at the first stage wage is negotiated through collective bargaining and at the second stage employment in each firm 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