Wirtschaft und Gesellschaft

42. Jahrgang (2016), Heft 4

ments.48 Alternatively one could argue that dividend payments are an indication of increasing “shareholder value” orientation, inducing a “downsize
and distribute” strategy that will supress wages and employment.49 Household debt has been found to reduce wage share arguably through increasing financial vulnerability that has an adverse effect on workers’ willingness to engage in collective action.50
WELFARE is social government spending at the individual level as explained in the previous section. This variable is measured at the country
level and is the same for all sectors.
INEQUALITY is country level inequality measured as the Gini coefficient
or the income share of the top one percentile, again the same for all sectors.
We apply two main estimation techniques. Our baseline estimation is
performed using the within estimator (also referred to as Fixed Effects Estimator), while we estimate the variance-covariance-matrix of the remainder
error term using the approach developed by Driscoll and Kraay (1998).
Therefore, standard errors are fully robust with respect to serial correlation
within countries, cross-sectional correlation across sectors as well as general heteroscedasticity. Our main robustness controls are conducted with
a first difference estimator. This has the additional advantage that potential
non-stationarity concerns are taken care of given that all our variables are
unambiguously stationary in first differences.51
Since there is reason for concerns regarding the endogeneity and specifically reverse causality for our measures of technological change and
globalisation, and because the effect of other variables will most likely be
manifested with a time lag, all explanatory variables enter the equation
with a lag. It would be preferable to employ a General Method of Moments
estimator to tackle the issue of endogeneity as well as the dynamic nature
of the wage share. However, due to the limited number of cross sections in
our single country estimations this estimation method is not appropriate.
With regards to endogeneity concerns we employ the second best approach by using lagged values of the explanatory variables.52 In addition to
the pool of all sectors, separate regression analysis will be performed for
sector groups disaggregated as high skilled and low skilled sectors in manufacturing and services separately.
In separate regressions we employ four alternative measures of the
wage share for robustness check: i) the after tax wage share calculated as
explained in the previous section; ii) compensation of employees as a ratio
to value added, i. e. the wage share without the adjustment for self-employed workers; iii) wages and salaries as a ratio to value added – this is a
measure of primary market distribution since it excludes all redistribution
measures including social security contributions; iv) a sample without the
outliers in which we drop all observations where the wage share exceed 1.
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