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

Government agencies and other national and international institutions are asked to perform foThis 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.