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

6. Conclusion 
Our findings lend strong support to the political economy approach to functional income 
distribution. Technological change had an impact, especially in Austria and for the total 
country sample, but the effects are not robust with respect to the use of different 
specifications and the wage share in most countries in our sample appears to be driven by 
different variables reflecting the bargaining power of labour such as union density, adjusted 
bargaining coverage and government spending. In terms of economic significance, the 
decline in the wage share in Austria was most strongly driven by a deterioration of bargaining 
power as captured by union density and different measures of financialisation. The relevance 
of these variables differs considerably across countries, lending support to our approach of 
country specific estimations.  
We find that globalisation had a strong impact on the wage share in all countries. The 
effect of globalisation on the wage share was least strong in Denmark. In Austria, Germany 
and, less robust, in the UK, the effect is due to outward FDI as well as intermediate import 
penetration which reflects the impact of international outsourcing practices. Intermediate 
imports penetration had no significant impact in Spain while FDI played a smaller role in 
France and the US. Equivalently, and in opposition to the predictions of standard trade 
theory, globalisation also had a negative impact in ‘low-wage’ countries. There, intermediate 
imports and, especially, intermediate exports to high-wage countries appear to be drivers of 
the negative impact on the wage share. 
Different institutional variables appear to be relevant for each country. Germany 
exhibits the most robust positive effect of union density on the wage share, and there is also 
some positive effect of union density in Austria, while collective bargaining coverage plays a 
more important role in France and the UK together with social government spending.  
Financialisation had the most pronounced effect in Austria the UK and the US, while 
it appears to be also relevant in Germany. Estimations for other countries are inconclusive 
and require analysis using data on a more disaggregated level. 
We find mixed results for the effect of personal income inequality on the wage share. 
However, there is indicative confirmation for a negative effect in Austria, Germany and the 

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