Demand effects of the falling wage share in Austria |
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Authors: | Engelbert Stockhammer Stefan Ederer |
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Institution: | 1.Institut für Geld- u. Fiskalpolitik,Wirtschaftuniversit?t Wien,Vienna,Austria;2.?sterreichisches Institut für Wirtschaftsforschung,Wien,Austria |
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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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Keywords: | Distribution Demand Investment Consumption Foreign trade Macroeconomics Keynesian economics |
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