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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
