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

Wirtschaft und Gesellschaft 34. Jahrgang (2008), Heft 3
4.2 Real wages
According to the estimation results, employment in the foreign affiliates 
in the East as well as in developed countries have a significant negative 
effect on wages in industry, but no effect in the total economy. Table 3b 
shows the cumulative effect of each explanatory variable on wages in in-
dustry and total economy, calculated as the long run coefficients multipli-
ed by the actual change in the explanatory variable. In terms of economic 
significance, the increase in the affiliate employment in the East and in 
developed countries resulted in a 17.9% and 7.2% cumulative decline in 
real wages in industry during the period of 1996-2005 respectively. Thus 
altogether real wages would have increased 25.2% more in industry if 
there had been no Austrian foreign investment in this period.  
Although estimations for sub-sectors must be interpreted with care due 
to the low number of observations included, they still point at some inte-
resting results: in the total economy the increase in affiliate employment in 
developed countries has a negative effect in low skilled sectors (including 
both low skilled industry and service sectors), whereas there is a negative 
wage effect of Eastern affiliate employment in high skilled sectors. There 
is evidence of some positive effect of affiliate employment in the East on 
wages in services sectors as well as on wages in the low skilled sectors. 
This could be explained by a positive scope effect and skill upgrading in 
the low skilled or services sectors, which have a complementary relation 
to Eastern affiliate employment.  Based on the regression results for blue 
and white collar workers, there is only evidence of a negative wage effect 
for blue collar workers due to foreign affiliate employment in industry.  
Again the time dummies remain significant and are mostly negative, indi-
cating the significance of institutional factors as well as possible negative 
threat effects of capital mobility that is not necessarily reflected in the 
volume of actual transactions. 
4.3 Wage share
Combining the long run effects on employment and wages, we get the 
joint effect of the changes in capital stock (ICT and non-ICT) and the em-
ployment in foreign affiliates of Austria. Based on the calculated long run 
coefficients for the wage share, Table 3c reports the cumulative %-points 
effect15 of the actual change in the explanatory variable. These effects are 
partial effects for a given level of value added. 
In industry the increase in employment in the foreign affiliates of Austria 
in the East and the developed countries has resulted in a cumulative decli-
ne of 13.2%-points and 4.7%-points in the wage share respectively during 
1996-2005 (thus a total of -17.9%-points). These results overestimate the

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