Essays on globalisation, inflation and monetary policy

Abstract

This thesis comprises three essays. The first examines the impact of factor, product and financial market integration on the labour share of income. In particular, we investigate how the changing composition of international trade towards trade in intermediate goods may weaken the bargaining power of labour and lead to greater wage restraint among workers. We approximate the extent of the "offshoring" of tasks in the production process with outflows and outward stocks of FDI. Moreover, we distinguish between total flows of FDI and those that are destined for emerging economics, which are more likely to be driven by labour cost differentials. We find that it is the magnitude of total FDI outflows, rather than the destination of those outflows, that is associated with lower labour shares in advanced economies. Our results also suggest that globalisation leads to lower labour shares by weakening the impact of labour market institutions