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Social and Economic Factors Determining the Development of the Regional Income Distribution in Austria

University of Economics and Business Administration, Austria

Key words: Regional Phillips-Curve, Aggregation-Hypothesis, Wage-Leadership-Hypothesis, Multivariate Regression Model, Cointegration Analysis

This research investigates the influence social and economic variables have on the development of the regional income distribution in Austria's nine states. The three main research hypotheses to be tested are:

  1. the relationship between unemployment and the rate of change of money wage rates as expressed in the form of regional Phillips-curves;
  2. the relationship between the dispersion of the regional (i.e., state) unemployment rates, the aggregated rate of change of money wage rates, and the level of employment. This relationship will be tested with the Aggregation-Hypothesis; and
  3. the relationship between wage rate changes in a 'leading market' with a heavy demand for labour and 'non-leading markets,' where the pressure in the labour market is much less severe. The existence of a 'leading market' results in higher than expected wage increases in the 'non-leading markets' through a transfer mechanism, triggered by trade union bargaining. The resulting upward pressure of the transfer mechanism on the wage rate changes will be stronger with greater regional disparity in unemployment. This relationship will be tested with the Wage-Leadership-Hypothesis.
This research is based on time-series data from 1966-1999 (on a yearly basis) for the nine Austrian states. This period covers important stages of the Austrian economic development, including the end of the high-inflation period in 1974/75 and the joining of the European Union in 1995. The methods investigating the three main hypotheses include multivariate regression models and cointegration analyses.