On the economic rationale for codetermination law

“This paper develops a positive (efficiency) economic case for codetermination law resting on the correction of labor and capital market and organizational failures. A legally mandated codetermination structure is shown to provide employee ‘checks’ on several structural incentives for management opportunism. Codetermination is shown to offer advantages for technical efficiency, skill development and knowledge generation through its protection of specific human capital investments. Financial markets cannot enforce codetermination due to a set of free rider problems.”


Academic Paper

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