European Business Schools Librarian's Group
Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics
Demand effects of the falling wage share in Austria
Engelbert Stockhammer () and Stefan Ederer ()
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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.
JEL-codes: E12; E20; E22; E25; E61 August 2007
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