Demand effects of the falling wage share in Austria

Engelbert Stockhammer and Stefan Ederer

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

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 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Demand effects of the falling wage share in Austria (2008)
Working Paper: Demand effects of the falling wage share in Austria (2007)
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