This working paper deals with the effects of collective bargaining and other forms of collective employee representation (such as works councils) on employment and unemployment. Collective bargaining is concerned with both substantive issues, such as rates of pay or weeks of notice to be given before lay-off, and procedural matters in which management and employee representatives jointly manage important areas of employee relations thereby contributing to workplace co-operation. Whereas many substantive rules can be said to cause lower levels of employment and enterprise efficiency, procedural rules by reducing transaction costs, improve co-operation and thus, indirectly, help jobs.

The paper starts by examining some substantive rules and the evidence for their effects on employment in OECD countries. It then looks at some of the compensating flexibilities which are introduced by procedural rules. These may be dependent on substantive rules: for example, employment security may be a ...