Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Demand effects of the falling wage share in Austria
() and Stefan Ederer
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.
JEL-Codes: E12; E20; E22; E25; E61; (follow links to similar papers)
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