Thesis advisor: Fabio Ghironi / In Chapter 1, I analyze the cross-country transmission of business cycles when firms relocate production abroad, at locations with lower labor costs. In the model, I distinguish between fluctuations in the number of offshoring firms (the extensive margin) and the value added per offshoring firm (the intensive margin) as separate transmission mechanisms. Firms are heterogeneous in labor productivity. They face a sunk entry cost at home and an additional fixed cost to produce offshore. The model replicates the extensive and intensive margin dynamics that I document for Mexico's maquiladora sector. Offshoring enhances the co-movement of output between the countries involved. Offshoring also reduces price dispersion across countries, because it dampens the real exchange rate appreciation that follows improvements in domestic productivity. In Chapter 2, I estimate the conditional correlations and impulse responses of three indicators of offshoring to Mexico (total value added, value added per plant, and the number of plants) for U.S. permanent technology shocks. Using data from U.S. manufacturing and Mexico's maquiladora sector, I identify U.S. permanent technology shocks in a structural VAR model with long-run restrictions. Following a positive shock, offshore production in Mexico exhibits an immediate increase along its intensive margin, but returns to its initial level over time. The extensive margin does not adjust on impact, but increases gradually towards a permanently higher level. The model of offshoring in Chapter 1 matches qualitatively the business cycle dynamics of offshoring to Mexico. In Chapter 3 (co-authored with Federico Mandelman), we analyze the dynamics of labor migration and the insurance role of remittances in a two-country, real business cycle framework. Emigration increases with the expected stream of future wage gains, and is dampened by the sunk cost reflecting border enforcement. During booms in the destination economy, the scarcity of established immigrants enhances the volatility of the immigrant wage and remittances. The welfare gain from the inflow of unskilled labor increases with the complementarity between skilled and unskilled labor, and with the share of the skilled among native labor. The model matches the cyclical dynamics of the unskilled immigration into the U.S. and remittances sent back to Mexico. / Thesis (PhD) — Boston College, 2009. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.