42. Jahrgang (2016), Heft 4 Wirtschaft und Gesellschaft nomic significance, the decline in the wage share in Austria is most strongly driven by a deterioration of bargaining power as captured by union density and different measures of financialisation. However, the most relevant institutional variables differ considerably across countries, lending support to our approach of country specific estimations. Our findings have important policy implications. Rising inequality is not an inevitable outcome of technological change. Tackling income inequality requires a restructuring of the institutional framework in which bargaining takes place and a levelled play-ground where the bargaining power of labour is more in balance with that of capital. The impact of globalisation is likely to be significantly moderated or offset by stronger bargaining power of labour via an improvement in union legislation, increasing the coverage of collective bargaining, increasing the social wage via public goods and social security and international labour standards embedded in a broader strategy of global cooperation for high road labour market policies and macroeconomic policy coordination. Each country would have to address specific issues supporting the strongest positive drivers of the wage share while mitigating factors that reduce workers’ bargaining power. Furthermore, our results suggest that a simple attempt to reduce income inequality through skill-upgrading will not work as skill-biased technological change does not seem to be the most relevant factor determining the distribution between labour and capital. Endnotes 1 2 3 4 5 6 7 8 Atkinson, Piketty and Saez (2011). The time period is determined by data availability at a detailed sectoral level. More detailed results and discussion on countries other than Austria can be found in Guschanski and Onaran (2016a). Stockhammer (2009). EC (2009). Kaldor (1955). Kalecki (1954); Hein (2015). Country-level analysis always faces the question as to whether the decline in the wage share captures changes in sectoral composition rather than a simultaneous decline of the wage share in all sectors; therefore, in order to abstract from mere reallocation effect and focus on a distributional analysis it is crucial to isolate the within sector development of the wage share. This can be illustrated simply by writing the aggregate wage share as a function of weighted sectoral wage shares (EC [2009]): n LCC VAi, t LCi, t t Eq. (1) WSC =∑ ∗ t = C VAi, t VAt i =1 VAC t where i stands for the sector and t for the year. WSC t stands for the aggregate wage share of country C, which is defined by labour compensation LCC t as a ratio to total ) or GDP, and can be expressed as the sum of within sector domestic value added (VAC t LC VA wage shares VAii,,tt weighted by the sectors’ contribution to total value added iC, t . ConseVAt 583