1. 11th FIW Workshop, 8th of April 2010, Vienna www.wiiw.ac.at AUSTRIA 2020 The impact of medium-term global trends on the Austrian economy E. Christie, J. Francois, M. Holzner, S. Leitner, O. Pindyuk FIW Research Reports: http://www.fiw.ac.at

2. 2 Contents  Overview of Austria’s Current Economic Structure  Overview of Macroeconomic Projections  Structural Change in Austria  Household Inequality in Austria

3.  wiiw 3 Structure of the Austrian economy, 2008 Source: GTAP, wiiw calculations. * Rank 1 means the highest ratio. [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added.

4.  wiiw 4 Coefficients of correlation between Austria and other regions Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Value addedExportsImports Germany0.960.86 EU 130.990.890.86 EU 120.960.810.79 EEA0.930.580.83 NAFTA0.85 0.72 Other OECD0.900.740.64 China0.610.330.58 Brazil0.860.470.76 Latin America0.790.150.76 India0.460.480.34 Russia0.780.110.65 ASEAN0.730.370.61 Middle East and North Africa0.640.030.78 Sub-Saharan Africa0.630.020.77 Rest of World0.690.240.62 Source: CGE projection-based estimates

5.  wiiw 5 Geographical structure of Austrian trade in 2008, % Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. ExportsImports Germany27.332.9 EU 1326.027.7 EU 1214.212.1 EEA5.43.6 Europe72.976.3 NAFTA6.35.5 Other OECD2.32.0 China2.83.1 Brazil0.60.5 Latin America1.00.8 India0.60.4 Russia2.01.8 ASEAN2.93.1 Middle East and North Africa2.72.4 Sub-Saharan Africa1.20.8 Rest of World4.73.4 Source: CGE projection-based estimates

6.  wiiw 6 Model  Multi-region CGE model with imperfect competition  Basic database is built from the GTAP7 database (benchmarked to 2004)  32 sectors, 16 regions  Exogenous variables: GDP, population, skilled and unskilled labor, energy prices, TFP in primary food production sector

7.  wiiw 7 Regional Aggregation Scheme Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. GDP 2008, EUR bn Real annual average growth rate, 2008-2020 Austria2831.46 Germany2,5091.04 EU 138,4461.55 EU 121,3213.12 EEA6621.29 NAFTA11,6312.10 Other OECD4,7682.07 China3,1039.33 Brazil1,0743.26 Latin America1,8013.49 India8247.51 Russia1,1452.92 ASEAN8635.10 Middle East and North Africa1,4854.45 Sub-Saharan Africa6784.98 Rest of World1,01410.26 source: IMF WEO, October 2009 (with projection through 2020).

8.  wiiw 8 Regional Shares of Global GDP: 2008 & 2020 Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Source: CGE projection-based estimates

9.  wiiw 9 Population and labor force growth Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. PopulationSkilled laborUnskilled labor Austria 4.722.7-6.8 Germany -0.87.4-8.9 EU 13 6.825.3-11.6 EU 12 -1.121.5-12.2 EEA 1.2 NAFTA 10.0 Other OECD 4.9 China 6.2 Brazil 14.0 Latin America 15.4 India 16.8 Russia -5.8 ASEAN 8.7 Middle East and North Africa 23.9 Sub-Saharan Africa 29.8 Rest of World10.0 source: IMF WEO, Eurostat

10.  wiiw 10 Energy price trends in the 2008-2020 baseline Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Benchmark prices 20042008/92020 Crude oil, average€/bbl30.441.085.0 Natural gas, average€/mmbtu4.14.56.0 Source: World Bank Pink Sheets and IEA, and industry projections. Cumulative increases in physical capital and TFP: 2008-2020 TFP, changePhysical capital, % change Austria3.1428.76 Germany4.5526.73 EU135.2032.87 EU1220.1847.71 Source: CGE projection-based estimates

11.  wiiw 11 Regional Shares of Global Output by Gross Value: 2008 & 2020 Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Source: CGE projection-based estimates

12.  wiiw 12 Regional Shares of Global Exports by Value: 2008 & 2020 Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Source: CGE projection-based estimates

13.  wiiw 13 Regional Shares of Global Imports by Value: 2008 & 2020 Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Source: CGE projection-based estimates

14. 14 Cumulative % increases in real global commodity prices: 2008-2020 primary1.90light manufactures-11.35 coal216.42chemicals rubber plastics6.98 oil107.42petrochemicals85.73 gas30.02electrical machinery-11.84 mining182.81other machinery and equipment-2.48 processed foods-2.73utilities14.03 textiles-11.00construction0.95 clothing-19.02trade-17.72 leather-12.07transport6.33 lumber-4.99communications-14.88 paper and publishing-2.02other finance-10.95 metals19.88insurance-7.89 fabricated metals2.68other business services-11.11 nonmetallic minerals15.73rec and other consumer servs-7.20 motor vehicles-1.34other Services-6.83 other transport equipment-2.89 Source: World Bank Pink Sheets and IEA, and industry projections (for energy), and CGE model projections (for other).

15. 15 Changes in CAB, annual position, EUR mn, 2020 relative to 2008 Source: CGE projection-based estimates Austria-4,142 Germany-6,819 Other EU13-157 EU12-27,918 Other EEA15,906 NAFTA-314,000 Other OECD-52,847 China300,493 Brazil10,063 Latin America9,480 India-10,312 Russia127,556 ASEAN83,012 Middle East, North Africa155,236 Sub-Saharan Africa16,256 Other non-OECD-14,450

16. 16 Change in the real output, value of exports and imports in Austria over 2008-2020, % OutputExportsImports primary21.765.112.6 mining37.0408.7283.1 processed foods13.610.825.7 textiles-21.4-32.732.3 clothing-29.1-43.753.4 leather-21.7-25.333.4 metals127.9179.739.4 non-metallic minerals33.688.661.4 motor vehicles18.319.023.9 light manufactures5.7-6.264.5 chemicals rubber plastics45.969.222.9 OutputExportsImports petrochemicals13.5169.0129.8 electrical machinery-25.2-24.721.0 utilities32.2106.720.4 construction22.125.861.1 trade14.03.364.4 transport30.643.942.8 communications12.80.246.8 other finance9.74.424.1 insurance15.58.524.1 other business services11.46.628.7 Source: CGE projection-based estimates.

17. 17 Net exports, %GDP Source: CGE projection-based estimates

18. 18 Regional Shares of Austrian Exports by value: 1992, 2008, & 2020 Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Source: CGE projection-based estimates Europe 83.2% Europe 72.9% Europe 67.8%

19. 19 Regional Shares of Austrian Imports by value: 1992, 2008, & 2020 Structure of Austria’s value added, exports and imports, %, and ranks* of industries by capital-labor ratios and ratios of skilled labor to unskilled labor in total costs in 2008 [1] [1] [1] Coal, gas and oil sectors were excluded from this analysis due to their low shares in the total value added. Source: CGE projection-based estimates Europe 83.0% Europe 76.3% Europe 68.8%

20. 20 Household Inequality in Austria  Stylised fact: Austria a winner of internationalisation but average wage earner did not participate in gains  Literature: only few studies on distributional trade effects in Austria & no multi-country CGE analysis  Assumption 2020: unskilled labour -7%, skilled labour +23% (CEDEFOP), population growth 5%  GTAP input 2020: factor income for unskilled +11%, skilled +18%, capital +22%  Mapping exercise: regression based assignment of inactive to labour force using EU-SILC micro data

21. 21 Mapping exercise results  Income shares: skilled vs. unskilled labour income ratio increases from 37/63 to 48/52 by 2020  Average income: skilled -5%, unskilled +33% due to changes in the number of persons  Gini coefficient: Initial 27.5, changes in skilled vs unskilled increases to 28.3, higher capital income increases to 28.5, below average increase of transfers reduces inequality only to 28.1 in 2020  Policy: Compensation of groups being relatively worse off, increasing capital and high income taxation

22. 22 AUSTRIA 2020 The impact of medium-term global trends on the Austrian economy E. Christie, J. Francois, M. Holzner, S. Leitner, O. Pindyuk FIW Research Reports: http://www.fiw.ac.at