Full text: Wirtschaft und Gesellschaft - 2008 Heft 3 (3)

34. Jahrgang (2008), Heft 3 Wirtschaft und Gesellschaft
337
1. Introduction
The aim of this paper is to empirically analyze the impact of globaliza-
tion – as measured by the trade and capital flows – on the labor market 
outcomes in Austria. In the last fifteen years there has been a significant 
increase in the globalization of the Austrian economy through an incre-
ase in exports, final imports, intermediate imports, and outward foreign 
direct investment (FDI). The integration of the Central and Eastern Europe 
(CEECs) to the European economic sphere, added a new dimension to 
the globalization of the Austrian economy, although Austrian trade and 
FDI towards Western Europe also increased significantly during this pe-
riod. Austria is one of the relatively most integrated Western high wage-
countries to the low-wage East. Its geographical proximity as well as his-
torical ties and its small size played a role in this fast integration. 
The increase in unemployment (from 3.8% in 1989 to 5.8% as of 2006 
albeit a decline again to 4.1% as of 2008) and wage moderation in the me-
antime attracted public attention to globalization, and in particular Eastern 
enlargement. Although the Austrian firms have been able to increase their 
profitability during Eastern Enlargement,1 whether the gains have been 
shared with labor is being debated. The stylized facts of the labor market 
developments raise some doubts: Since the 1980s industrial employment 
is decreasing, and total employment is stagnant in spite of the jobs created 
in services. The opposite trend in domestic employment compared with 
the increasing foreign affiliate jobs is particularly striking. In the meantime 
real wages have stagnated in the total economy particularly since the mid 
1990s in striking contrast to the strong improvement in labor productivity. 
* This paper is a revised short version of a project report prepared for the Arbeiterkammer 
Wien. The author is grateful to Paul Ramskogler for the excellent research assistance, 
to Werner Raza, Sepp Zuckerstaetter, Martin Falk, Engelbert Stockhammer, Wilfried Alt-
zinger, Christian Bellak, Thomas Grandner, Herbert Walther, Markus Leibrecht, Mehtap 
Hisarc?kl?og¡lu for fruitful discussions, and to Ursula Havel, Franz Granner, Lucia Glinsner, 
Irene Langer, René Dell'mour, Karl Klein, Henriette Killian, and Andreas Buzek for their 
valuable support about data. All remaining errors are mine.
The Effects of Globalization on Wages,  
Employment, and Wage Share in Austria*
Özlem Onaran
        

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