Full text: Wirtschaft und Gesellschaft - 2016 Heft 4 (4)

Wirtschaft und Gesellschaft

42. Jahrgang (2016), Heft 4

In the following, we refer to the Marxist, Institutionalist and post-Keynesian/Kaleckian analysis as the Political Economy approach.
Although the New Keynesian and the Political Economy approach to income distribution start from different assumptions, both arrive at a bargaining framework to analyse distribution of income, at least in the more recent
studies in the New Keynesian tradition. The difference is that the New
Keynesian approach discusses the effects in a rather technical manner
driven by a production function approach, while studies following the bargaining approach would always relate the developments to changes in
bargaining power. For example, New Keynesian scholars discuss how
globalisation changed the factor supplies or costs of intermediate products, and how this technically affects parameters in the equation for the
wage share. In contrast, political economists rather look at how globalisation and financialisation increase the fall-back options of capital while
decreasing the fall-back options of labour and thereby change the relative
bargaining power between the two factors.
Both the mainstream studies and the research in the tradition of political
economy find substantial negative effects of globalisation on the wage
share. IMF (2007) and EC (2007) employ import and export prices, immigration, offshoring, and trade openness (measured as export plus imports
as a ratio to value added) as measures of globalisation and find all of them
to have the expected negative effect on the wage share. However, there is
a difference in the interpretation of the results depending on the country
group used.
Publications focusing on within sector wage shares find mixed results.
Sector-level data allows to differentiate between the decline in the withinsector wage share and a change in the sectoral composition of the economy which is an advantage over country-level data.8 Bassanini and
Manfredi (2012) fail to find a robust effect of sector specific import prices
on the wage in all but one specification and do not obtain a significant coefficient for import penetration at all. They argue that the negative effect confirmed by country level studies result from a process of reallocation of production towards sectors with lower wage share brought about by increasing competition from abroad and confirm their hypothesis by additional estimations on the sectoral composition in their sample. Thereby they refer to
the “between component” of the aggregate wage share. They do find, however, a negative impact of offshoring, especially in high wage share countries, while FDI appears to be insignificant in their analysis. The negative
effect of offshoring is furthermore confirmed by Lin and TomaskovicDevey (2013) for the US.
Research in the tradition of political economy confirm these results, especially with respect to trade openness variables,9 as well as intermediate import penetration and outward FDI for within sector wage shares in Austria.10

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