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Demand effects of the falling wage share in Austria

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  • Engelbert Stockhammer

    ()
    (Department of Economics, Vienna University of Economics & B.A.)

  • Stefan Ederer

    ()
    (Department of Economics, Vienna University of Economics & B.A.)

Abstract

This paper aims at empirically estimating the demand effects of changes in functional income distribution for Austria. Based on a Post-Kaleckian macro model, this paper estimates the effects of a change in the wage share on the main demand aggregates. The results for the behavioral functions for consumption, investment, prices, exports and imports are compared with the specifications of the WIFO macro model and the IHS macro model. A reduction in the wage share has a restrictive effect on domestic demand as consumption decreases more strongly than investment increases. Because of the strong effects on net exports the overall effects of a decrease in the wage share are expansionary. However the latter effect operates only as far as the fall in the wage share increases competitiveness. As wage shares were also falling in Austria’s main trading partners, the effect seems to have been neutralized.

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Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp106.

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Date of creation: Aug 2007
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Handle: RePEc:wiw:wiwwuw:wuwp106

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  1. Josef Baumgartner & Fritz Breuss & Serguei Kaniovski, 2004. "WIFO-Macromod. An Econometric Model of the Austrian Economy," WIFO Working Papers, WIFO 241, WIFO.
  2. Stockhammer, Engelbert & Onaran, Ozlem, 2004. "Accumulation, distribution and employment: a structural VAR approach to a Kaleckian macro model," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 15(4), pages 421-447, December.
  3. Eckhard Hein & Carsten Ochsen, 2003. "Regimes of Interest Rates, Income Shares, Savings and Investment: A Kaleckian Model and Empirical Estimations for some Advanced OECD Economies," Metroeconomica, Wiley Blackwell, Wiley Blackwell, vol. 54(4), pages 404-433, November.
  4. Engelbert Stockhammer & �zlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 33(1), pages 139-159, January.
  5. Thomas I. Palley, 2006. "Currency Unions, the Phillips Curve, and Stabilization Policy: Some Suggestions for Europe," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 3(2), pages 351-369.
  6. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 14(4), pages 375-93, December.
  7. Fritz Breuss, 2007. "Globalization, EU Enlargement and Income Distribution," WIFO Working Papers, WIFO 296, WIFO.
  8. Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 13(3), pages 395-412, September.
  9. Gerhard Fenz & Martin Spitzer, 2005. "AQM – The Austrian Quarterly Model of the Oesterreichische Nationalbank," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 104, Oesterreichische Nationalbank (Austrian Central Bank).
  10. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 57, July.
  11. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  12. Eckhard Hein & Lena Vogel, 2007. "Distribution and growth reconsidered - empirical results for Austria, France, Germany, the Netherlands, the UK and the USA," IMK Working Paper 03-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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Cited by:
  1. Eckhard Hein & Artur Tarassow, 2010. "Distribution, aggregate demand and productivity growth: theory and empirical results for six OECD countries based on a post-Kaleckian model," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 34(4), pages 727-754.
  2. Özlem Onaran & Giorgos Galanis, 2013. "Income Distribution and Aggregate Demand: A Global Post-Keynesian Model," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp319, Political Economy Research Institute, University of Massachusetts at Amherst.
  3. Eckhard Hein & Marc Lavoie & Till van Treeck, 2008. "Some instability puzzles in Kaleckian models of growth and distribution: A critical survey," IMK Working Paper 19-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  4. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
  5. Jochen Hartwig, 2013. "Ist Lohnzurückhaltung gut oder schlecht für das Schweizer Wirtschaftswachstum?," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, KOF Swiss Economic Institute, ETH Zurich, vol. 7(2), pages 33-45, June.
  6. Jochen Hartwig, 2014. "Testing the Bhaduri-Marglin Model with OECD Panel Data," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 14-349, KOF Swiss Economic Institute, ETH Zurich.
  7. Onaran, Özlem & Galanis, Giorgos, 2012. "Is aggregate demand wage-led or profit-led? National and global effects," ILO Working Papers, International Labour Organization 478623, International Labour Organization.
  8. Ásgeir Daníelsson, 2009. "QMM. A steady state version," Economics, Department of Economics, Central bank of Iceland wp44, Department of Economics, Central bank of Iceland.

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