On the Determinants of Mandatory Works Councils in Germany

German works councils are often thought of as operating in all firms that exceed the basic size threshold (of five permanent employees) established under law. Drawing on a new large‐scale, representative German data set, we report that only one‐fifth of firms in our sample have works councils even if such firms do account for almost three‐fourths of employment. The principal factors behind works council presence emerge as fairly conventional: firm size, firm age, branch plant status, the gender composition of the work force, and certain working arrangements. There are also signs of a close relation between workplace union density and council presence. However, some controversial causal links suggested in an earlier econometric literature receive little support.