34. Jahrgang (2008), Heft 3 Wirtschaft und Gesellschaft 337 1. Introduction The aim of this paper is to empirically analyze the impact of globaliza- tion – as measured by the trade and capital flows – on the labor market outcomes in Austria. In the last fifteen years there has been a significant increase in the globalization of the Austrian economy through an incre- ase in exports, final imports, intermediate imports, and outward foreign direct investment (FDI). The integration of the Central and Eastern Europe (CEECs) to the European economic sphere, added a new dimension to the globalization of the Austrian economy, although Austrian trade and FDI towards Western Europe also increased significantly during this pe- riod. Austria is one of the relatively most integrated Western high wage- countries to the low-wage East. Its geographical proximity as well as his- torical ties and its small size played a role in this fast integration. The increase in unemployment (from 3.8% in 1989 to 5.8% as of 2006 albeit a decline again to 4.1% as of 2008) and wage moderation in the me- antime attracted public attention to globalization, and in particular Eastern enlargement. Although the Austrian firms have been able to increase their profitability during Eastern Enlargement,1 whether the gains have been shared with labor is being debated. The stylized facts of the labor market developments raise some doubts: Since the 1980s industrial employment is decreasing, and total employment is stagnant in spite of the jobs created in services. The opposite trend in domestic employment compared with the increasing foreign affiliate jobs is particularly striking. In the meantime real wages have stagnated in the total economy particularly since the mid 1990s in striking contrast to the strong improvement in labor productivity. * This paper is a revised short version of a project report prepared for the Arbeiterkammer Wien. The author is grateful to Paul Ramskogler for the excellent research assistance, to Werner Raza, Sepp Zuckerstaetter, Martin Falk, Engelbert Stockhammer, Wilfried Alt- zinger, Christian Bellak, Thomas Grandner, Herbert Walther, Markus Leibrecht, Mehtap Hisarc?kl?og¡lu for fruitful discussions, and to Ursula Havel, Franz Granner, Lucia Glinsner, Irene Langer, René Dell'mour, Karl Klein, Henriette Killian, and Andreas Buzek for their valuable support about data. All remaining errors are mine. The Effects of Globalization on Wages, Employment, and Wage Share in Austria* Özlem Onaran