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Demand effects of the falling wage share in Austria

  • Engelbert Stockhammer

    ()

  • Stefan Ederer

    ()

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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File URL: http://hdl.handle.net/10.1007/s10663-008-9069-0
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Article provided by Springer in its journal Empirica.

Volume (Year): 35 (2008)
Issue (Month): 5 (December)
Pages: 481-502

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Handle: RePEc:kap:empiri:v:35:y:2008:i:5:p:481-502
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  1. Fritz Breuss, 2007. "Globalization, EU Enlargement and Income Distribution," WIFO Working Papers 296, WIFO.
  2. Engelbert Stockhammer & Özlem Onaran & Stefan Ederer, 2007. "Functional income distribution and aggregate demand in the Euro-area," Department of Economics Working Papers wuwp102, Vienna University of Economics and Business, Department of Economics.
  3. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  4. 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.
  5. 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, vol. 54(4), pages 404-433, November.
  6. 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.
  7. Gerhard Fenz & Martin Spitzer, 2005. "AQM – The Austrian Quarterly Model of the Oesterreichische Nationalbank," Working Papers 104, Oesterreichische Nationalbank (Austrian Central Bank).
  8. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
  9. Stockhammer, Engelbert & Onaran, Ozlem, 2004. "Accumulation, distribution and employment: a structural VAR approach to a Kaleckian macro model," Structural Change and Economic Dynamics, Elsevier, vol. 15(4), pages 421-447, December.
  10. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, May.
  11. Josef Baumgartner & Fritz Breuss & Serguei Kaniovski, 2004. "WIFO-Macromod. An Econometric Model of the Austrian Economy," WIFO Working Papers 241, WIFO.
  12. Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 13(3), pages 395-412, September.
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