Full text: The political economy of income distribution: industry level evidence from Austria (156)

38 
 
Globalisation 
Among our globalisation variables intermediate import penetration appears to have a negative 
impact on the wage share across all skill groups within the manufacturing sectors given that it 
is negative and significant for high and low skilled sectors alike as can be seen in Table 3. In 
the services sectors our data for intermediate import penetration is limited to one sector 
(recycling), but our results for the total economy are robust to the exclusion of this sector. 
This finding is also robust when different estimation methodologies are used. Intermediate 
import penetration is significant in specifications (1) to (3) when estimated in first 
differences. The fact that intermediate import penetration has a robust negative effect across 
all skill groups suggests that outsourcing of intermediate production may have harmed blue 
and white collar workers alike in Austria. 
Outward FDI, equally negative and robust in our estimation for the total sample as 
intermediate import penetration, appears to have different effects across industry types. It has 
a negative and statistically significant effect in manufacturing as a whole as well as in low 
skilled manufacturing sectors in specifications (4) to (6) in Table 3, but the effect turns 
positive in high skilled manufacturing when the financialisation variables are included. For 
total service sectors its overall effect is positive for all specifications and statistically 
significant for specification (4). Although this effect appears to be driven mainly by high 
skilled services sectors as can be seen in Table 4, outward FDI is not robust to the inclusion 
of financialisation variables and switches its sign. Our measure of FDI is the variable for 
which we are most concerned about non-stationarity as our unit root test indicate that it’s 
integrated of order one. Therefore we prefer to rely on the estimations in first differences for 
the analysis of outward FDI. In these specifications reported in Table A2 in the Appendix, 
FDI has the same negative effect for total manufacturing sectors while it is positive but 
statistically insignificant for total services. While the effect of FDI in manufacturing is driven 
by high and low skilled sectors alike when measured in first differences, the positive sign in 
services is not present for any of the sub-samples of high or low skilled service sectors.  
Generally, it is plausible that there is a skill bias creating a higher demand for high skilled 
labour through outward FDI if it is of a vertical (cost-seeking) nature. It is also plausible that 
this effect is less strong in non-tradable service sectors with a more horizontal market seeking 
nature. Other mechanisms like the threat effects associated with a change in the fall back 
options for capital and labour are also expected to be less important for high skill labour and
        

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