Using a large panel data set it is investigated whether works councils act as sand or grease in the operation of German firms. Stochastic production frontier analysis indicates that establishments with and without a works council do not exhibit significant differences in efficiency.

Difference-in-difference estimates indicate that the new law on part-time work in Germany has raised the share of part-time workers in those plants that already used part-time employment whereas it has not stimulated the introduction of part-time work in other plants.