ABSTRACT
The economic analysis of employee representa tion (ER) has followed two very different tracks. The economics literature on trade union forms of employee representation is voluminous and dates back more than a century. In contrast, nonunion forms of employee representation, such as shop committees, works councils, and company unions, have received only scant attention in re cent years from American economists. The most noteworthy exception is the recent paper by Free man and Lazear (1995) that applies economic theory to an examination of European-style works councils. Also relevant is a small but growing literature in economics, such as studies by Levine and Tyson (1990), Ben-Ner and Jones (1995), and Levine (1995), which examines the theoretical underpinnings of employee involvement pro grams. As noted there, participation can take two forms: direct participation, in which employees communicate and interact with management; and indirect participation, in which employees are represented by certain of their peers through vari ous forms of committees and councils in deal ings with management. It is the latter form that is examined here, although a number of the im plications and conclusions also apply to the former.
