Wirtschaft und Gesellschaft 42. Jahrgang (2016), Heft 4 non-ICT capital services as a ratio to value added in sector i; these capture the effects of technological change. is a sector specific coefficient. We do not include period effects in our baseline estimation since several of our bargaining variables are only available on the country level and are thereby statistically similar to year dummies while carrying more meaningful information. GLOBAL is a set of variables which capture the effects of globalisation, such as intermediate import penetration and inward and outward FDI intensity. Intermediate import penetration is clearly linked to the wage share insofar as intermediate imports are related to the process of outsourcing to foreign companies. However, our data for intermediate imports is based on the conversion of commodity indices to sector indices and thereby doesn’t allow us to calculate how much of the imported product is actually used by each sector, which would constitute a more precise outsourcing measure and requires the use of input-output tables. However, assuming that the use of imported goods stays relatively constant across sectors intermediate import penetration is a relevant measure for the reallocation of production abroad. We expect a negative effect on the wage share for low skilled sectors in capital abundant countries (as high-income OECD countries are usually assumed to be), brought about either by downward pressure on wages to maintain competitiveness, through trade-induced laboursaving technological change, or a reallocation of employment abroad or towards more capital-intensive sectors in the economy.42 The expected effect for high skilled sectors is more ambiguous, given that imports can also increase output if they are complementary to domestic production or reduce costs. The effect is theoretically even more ambiguous if one considers imports of final goods that are not produced domestically.43 Depending on which factor is the most dominant, effects are likely to differ across countries. We focus on outward FDI since it is clearly linked to developments in the wage share while the effect of inward FDI is more ambiguous, and less relevant for developed economies. Furthermore, estimations with inward FDI didn’t change our results for outward FDI and the coefficient was not robust. We generally expect the effect of outward FDI to vary across manufacturing and services and potentially across skill groups. FDI is generally classified into two categories: vertical or cost-seeking FDI leads to substitution of domestic, usually low skilled workers by foreign labour, thereby creating negative employment effects in the home country while also increasing intermediate imports. However, there might be a positive scale effect related to vertical FDI if it increases exports through cost advantages or for production purposes in foreign affiliates. Additionally, cost-seeking FDI might have an impact on the factor composition since the type of jobs created abroad are potentially of a low skilled nature, thereby lowering the 570