Working Paper: NBER ID: w26519
Authors: Simon Jäger; Benjamin Schoefer; Jörg Heining
Abstract: We estimate the wage effects of shared governance, or codetermination, in the form of a mandate of one third of corporate board seats going to worker representatives. We study a reformin Germany that abruptly abolished this mandate for stock corporations incorporated after August 1994, while it locked the mandate for the slightly older cohorts. Our research design compares firm cohorts incorporated before the reform and after; in a robustness check we additionally draw on the analogous difference in unaffected firm types (LLCs). We find no effects of board-level codetermination on wages and the wage structure, even in firms with particularly flexible wages. The degree of rent sharing and the labor share are also unaffected. We reject that disinvestment could have offset wage effects through the canonical hold-up channel, as shared governance, if anything, increases capital formation.
Keywords: shared governance; codetermination; worker representation; wages; Germany
JEL Codes: G3; K31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Abolition of the codetermination mandate for newly incorporated stock corporations (G34) | wage increases (J38) |
| Abolition of the codetermination mandate for newly incorporated stock corporations (G34) | wage policies (J38) |
| Abolition of the codetermination mandate for newly incorporated stock corporations (G34) | wage structure within firms (J31) |
| Abolition of the codetermination mandate for newly incorporated stock corporations (G34) | labor share (D33) |
| Shared governance (G38) | capital formation (E22) |
| Shared governance (G38) | output (C67) |
| Shared governance (G38) | labor productivity (J24) |
| Worker representation (J54) | worker bargaining power over wages (J52) |
| Shared governance (G38) | rent-sharing elasticities (D33) |
| Absence of wage effects (J31) | various industries or firm characteristics (L20) |