O regime de meta para a inflação foi adotado por um amplo conjunto de países nos últimos anos. Evidentemente, a definição da meta de inflação a ser perseguida é parte essencial do regime. O presente trabalho pretende contribuir para o debate sobre a meta ótima para o Brasil. O trabalho está dividido em três ensaios que, por caminhos diversos, buscam estimar quantitativamente os custos e benefícios de diferentes metas de inflação para a economia brasileira. O foco é sobre os efeitos de longo prazo de diferentes metas, uma vez que esses são mais relevantes do que os possíveis custos de ajustamento para uma eventual nova meta de inflação. O primeiro artigo aborda a questão sobre a meta de inflação ótima para o Brasil por meio da perda de bem estar medida pela demanda de moeda, um canal clássico considerado pela literatura. O segundo avalia a relação entre o nível e a incerteza sobre a inflação futura, utilizando para tanto modelos para a estimação da variância condicional da inflação, as expectativas de inflação relatadas por analistas econômicos e medidas de inflação implícita em preços de ativos. O terceiro artigo apresenta um enfoque mais teórico e estrutural, apresentando um modelo no qual existe um trade-off para a meta de inflação e calibrando esse modelo para obter estimativas da meta ótima para a economia brasileira. O modelo considera, de um lado, a perda de bem estar causada pela inflação através da demanda de moeda e, de outro, o benefício pela redução da perda de eficiência econômica ocasionada pela rigidez dos salários nominais. Concluímos que a análise exposta no presente trabalho sugere que, tendo em vista a redução da incerteza macroeconômica na economia brasileira nos últimos anos, haveria motivos também para uma redução gradual da meta de inflação. Contudo, também aponta que não se deve buscar metas muito baixas, uma vez que o benefício adicional em se reduzir a meta de inflação é relativamente pequeno quando já se está em um nível de inflação baixo. / Inflation targeting regimes have been adopted by a large number of countries in recent years. Obviously, the definition of the actual inflation target to be pursued is an essential part of this regime. This work aims to make a contribution to the debate about the optimal target for Brazil. The three essays follow different paths in an attempt to estimate the quantitative costs and benefits of the different inflation targets for the Brazilian economy. The focus is on the long-term effects of the different targets as these are more important than the possible costs during the transition towards the new inflation target. The first article discusses the optimal inflation target based on the welfare loss measured by the money demand function, a classic channel highlighted in the literature. The second assesses the relation between the level and uncertainty of future inflation. We investigate this issue with the use of econometric models to estimate the conditional variance of inflation, of inflation expectations reported by professional economic analysts and of break-even inflation rates. The third article presents a more theoretical and structural focus. We present a model in which there is a trade-off for the inflation target and this model is calibrated to obtain estimates of the optimal target for the Brazilian economy. On one hand, the model considers the welfare loss caused by inflation through money demand and, on the other, the benefit from the reduced frequency of periods in which a downward nominal wage restriction binds. Our conclusion is that the analysis presented suggests that, considering the lower macroeconomic uncertainty observed in Brazil in the recent years, there would be reasons for a gradual reduction in the inflation target. However, it also suggests that very low targets should not be set as the additional benefit in reducing the inflation target is relatively small once the inflation target has already been set at a low level.

This dissertation consists of three empirical essays on distortions in labor market outcomes in developing countries. Chapter 1 tests for downward nominal wage rigidity in markets for casual daily agricultural labor. It examines responses to rainfall shocks in 500 Indian districts from 1956-2008. First, nominal wages rise in response to positive shocks but do not fall during droughts. Second, after transitory positive shocks have dissipated, nominal wages do not fall back down. Third, inflation moderates these effects. Fourth, rigidities lower employment: landless laborers experience a 6% reduction in employment in the year after positive shocks. Fifth, consistent with separation failures, rationing leads to increased labor supply to small farms. New survey evidence suggests that agricultural workers and employers view nominal wage cuts as unfair and believe that they reduce effort. Chapter 2 (with Michael Kremer and Sendhil Mullainathan) describes the results of a field experiment that tests for self-control problems in labor supply. First, we find that workers will choose dominated contracts—which pay less for every output level but have a steeper slope—to motivate themselves. Second, effort increases significantly as workers’ (randomly assigned) payday gets closer. Third, the demand for dominated contracts (and their benefits) is concentrated amongst those with the highest payday effects. Finally, as workers gain experience, they appear to learn about their self control problems: the correlation between the payday effect and the demand for the dominated contract grows with experience. These results together suggest that self-control, in this context at least, meaningfully alters the firm’s contracting problem. Chapter 3 empirically examines the impact of multiple market failures on allocative efficiency in farm production in poor countries. In years when labor rationing is more likely in villages (due to wage rigidity), there is a 63% increase in sharecropped and leased land by small farmers. This is consistent with the prediction that distortions from a failure in one market can be reduced by reallocating other factors of production. In areas with worse credit access, there is less land adjustment in response to labor rationing. These results provide evidence for separation failures resulting from multiple missing markets.

abstract: Firms reduce investment when facing downward wage rigidity (DWR), the inability or unwillingness to adjust wages downward. I construct DWR measures and exploit staggered state-level changes in minimum wage laws as an exogenous variation in DWR to document this fact. Following a minimum wage increase, firms reduce their investment rate by 1.17 percentage points. Surprisingly, this labor market friction enhances firm value and production efficiency when firms are subject to other frictions causing overinvestment, consistent with the theory of second best. Finally, I identify increased operating leverage and aggravation of debt overhang as mechanisms by which DWR impedes investment. / Dissertation/Thesis / Doctoral Dissertation Business Administration 2017

O regime de meta para a inflação foi adotado por um amplo conjunto de países nos últimos anos. Evidentemente, a definição da meta de inflação a ser perseguida é parte essencial do regime. O presente trabalho pretende contribuir para o debate sobre a meta ótima para o Brasil. O trabalho está dividido em três ensaios que, por caminhos diversos, buscam estimar quantitativamente os custos e benefícios de diferentes metas de inflação para a economia brasileira. O foco é sobre os efeitos de longo prazo de diferentes metas, uma vez que esses são mais relevantes do que os possíveis custos de ajustamento para uma eventual nova meta de inflação. O primeiro artigo aborda a questão sobre a meta de inflação ótima para o Brasil por meio da perda de bem estar medida pela demanda de moeda, um canal clássico considerado pela literatura. O segundo avalia a relação entre o nível e a incerteza sobre a inflação futura, utilizando para tanto modelos para a estimação da variância condicional da inflação, as expectativas de inflação relatadas por analistas econômicos e medidas de inflação implícita em preços de ativos. O terceiro artigo apresenta um enfoque mais teórico e estrutural, apresentando um modelo no qual existe um trade-off para a meta de inflação e calibrando esse modelo para obter estimativas da meta ótima para a economia brasileira. O modelo considera, de um lado, a perda de bem estar causada pela inflação através da demanda de moeda e, de outro, o benefício pela redução da perda de eficiência econômica ocasionada pela rigidez dos salários nominais. Concluímos que a análise exposta no presente trabalho sugere que, tendo em vista a redução da incerteza macroeconômica na economia brasileira nos últimos anos, haveria motivos também para uma redução gradual da meta de inflação. Contudo, também aponta que não se deve buscar metas muito baixas, uma vez que o benefício adicional em se reduzir a meta de inflação é relativamente pequeno quando já se está em um nível de inflação baixo. / Inflation targeting regimes have been adopted by a large number of countries in recent years. Obviously, the definition of the actual inflation target to be pursued is an essential part of this regime. This work aims to make a contribution to the debate about the optimal target for Brazil. The three essays follow different paths in an attempt to estimate the quantitative costs and benefits of the different inflation targets for the Brazilian economy. The focus is on the long-term effects of the different targets as these are more important than the possible costs during the transition towards the new inflation target. The first article discusses the optimal inflation target based on the welfare loss measured by the money demand function, a classic channel highlighted in the literature. The second assesses the relation between the level and uncertainty of future inflation. We investigate this issue with the use of econometric models to estimate the conditional variance of inflation, of inflation expectations reported by professional economic analysts and of break-even inflation rates. The third article presents a more theoretical and structural focus. We present a model in which there is a trade-off for the inflation target and this model is calibrated to obtain estimates of the optimal target for the Brazilian economy. On one hand, the model considers the welfare loss caused by inflation through money demand and, on the other, the benefit from the reduced frequency of periods in which a downward nominal wage restriction binds. Our conclusion is that the analysis presented suggests that, considering the lower macroeconomic uncertainty observed in Brazil in the recent years, there would be reasons for a gradual reduction in the inflation target. However, it also suggests that very low targets should not be set as the additional benefit in reducing the inflation target is relatively small once the inflation target has already been set at a low level.

Submitted by Gian Silva (gian.economista@gmail.com) on 2013-05-15T14:33:02Z No. of bitstreams: 1 Dissertação.pdf: 894008 bytes, checksum: 93448fceb6721e0f54e5d8264ec33587 (MD5) / Approved for entry into archive by Suzinei Teles Garcia Garcia (suzinei.garcia@fgv.br) on 2013-05-15T20:03:54Z (GMT) No. of bitstreams: 1 Dissertação.pdf: 894008 bytes, checksum: 93448fceb6721e0f54e5d8264ec33587 (MD5) / Made available in DSpace on 2013-05-16T12:16:20Z (GMT). No. of bitstreams: 1 Dissertação.pdf: 894008 bytes, checksum: 93448fceb6721e0f54e5d8264ec33587 (MD5) Previous issue date: 2013-04-01 / Este estudo buscou incluir mais um ponto de dados às evidências que se acumulam a partir do trabalho de Olivei e Tenreyro (2007, 2010), que encontrou evidências empíricas sobre a importância da rigidez dos salários nominais sobre os efeitos reais da política monetária, explorando a ligação entre os diferentes padrões dos reajustes salariais encontrados nos países e o comportamento do produto e dos preços diante de choques de política monetária. Para o Brasil, inovações na política monetária que ocorrem no segundo trimestre ou no quarto trimestre provocariam uma resposta mais intensa do PIB do ponto de vista da significância estatística. Por outro lado, os choques monetários que ocorrem no primeiro ou no terceiro trimestre são associados a reações do produto com pouca significância estatística. Para a inflação, não foram conseguidas respostas estatisticamente significantes para nenhum tipo de trimestre. Incentivado por informações concretas sobre o calendário dos reajustes salariais, que sugerem a redefinição de uma grande fração dos salários entre março e maio e entre outubro e novembro, propomos uma possível explicação para as respostas diferenciadas baseadas em alteração concentrada dos contratos dos salários. / The aim of this study was to add another data point to evidence that accumulates from the work of Olivei and Tenreyro (2007, 2010), who found empirical evidence about the importance of nominal wage rigidity on the real effects of monetary policy, exploring the links between different patterns of wage adjustments found in the countries and behavior of the output and prices after monetary policy shocks. For Brazil, monetary policy innovations that occur in the second quarter or in the fourth quarter would cause a more intense response from GDP statistically. In contrast, monetary shocks that occur in first or in third quarter are associated with little reaction from GDP statistically. For inflation, the responses were not statistically significant for any kind of quarter. Based on specific information about the timing of wage changes, suggesting a redefinition of a large fraction of wages between March and May and between October and November, we propose a possible explanation for the different responses based on concentrated modification of contractual wages.

I have targeted to analyze the patterns of wage development in the changing macroeconomic conditions. According to the expectations the evolution of nominal and real wages is inter alia positively affected by the changes in labor productivity and negatively influenced by the deviation of unemployment rate from NAIRU. The evidence of procyclical behavior of real wages is not very robust as there was not found significant correlation in the time of decreasing real GDP. The most of results of the models applied on post Lehman Brothers period are consistent with the regressions based on complete data set. The chosen data proved to be not very suitable to show the extent of wage rigidity. The significant negative relationship between the development of real wages and changes in inflation rate implies the visibility of symptoms of wage rigidities even when we work with average macroeconomic variables.

This dissertation tries to gain insight on the possible impact of information and communication technologies (ICT) in economic and social relationships. Can we really talk about a revolution?. It is probably too early to conclude so. In any case, the social impact of ICT seems evident: the daily life of most individuals, firms and public administrations in developed countries is nowadays linked to new technologies. Regarding their economic impact, this dissertation has investigated the role played by ICT in explaining some of the stylized facts that have characterized European economies over the last 25 years. Using Spanish data, chapter 1 shows that capital accumulation, and especially ICT introduction over the last 20 years, has led firms to internally reorganize themselves. Furthermore, the implemented organizational changes have been skill-biased and have, thus, stimulated the demand for high-skilled workers. Based on these results, in chapter 2 an inter-temporal general equilibrium model endogenizing the capital-skill complementarity relationship has been developed. The model distinguishes between two types of jobs, complex and simple, and two types of workers, high- and low-skilled. Complex jobs can only be occupied by high-skilled while simple jobs can be filled by both, high- and low-skilled workers. High-skilled workers in simple jobs continue to search for a job in the complex segment (on-the-job search). Matching processes are represented by matching functions à la Pissarides. Workers search intensities are endogenous. Calibrated on the Belgian economy, the model is able to reproduce the observed increase in unemployment rates and relative wage rigidity. Chapter 3 extends this theoretical setup to an endogenous growth framework, where embodied and disembodied technological progress are differentiated and endogenized through a learning-by-doing process based on capital accumulation. The new model also provides a realistic representation of the labor market and it considers growth issues. Chapter 4 analyzes the effects of technological and organizational changes within firms on the turnover of different professional categories. Empirical results, based on a unique French data set, suggest that ICT introduction increases labor flows of manual workers and employees, whereas most of the new workplace organizational practices raise the turnover of managers. / Cette dissertation cherche à déterminer le possible impact des nouvelles technologies de l'information et la communication (TIC) sur les relations économiques et sociales. Est-ce que c'est correct de parler d'une révolution ? Il est sûrement trop tôt pour en conclure. Pourtant l'impact social des TIC semble évident : la vie quotidienne des ménages, entreprises et administrations publiques dans les pays développés est aujourd'hui liée aux nouvelles technologies. Concernant son impact économique, cette dissertation a cherché à signaler leur rôle dans les faits stylisés qui ont caractérisé l'évolution des économies européennes sur les 30 dernières années. En se servant des données espagnols, le chapitre 1 montre que, sur les 20 dernières années, l'accumulation de capital, particulièrement de TIC, a mené aux entreprises a se réorganiser internement. D'ailleurs, ces changements organisationnels ont été biaisés en faveur des travailleurs qualifiés dont la demande s'est vue stimulée. En se basant sur ces résultats, le chapitre 2 développe un modèle inter-temporaire d'équilibre général endogéneisant la relation de complémentarité entre capital et travail qualifié. Le modèle distingue entre deux types de postes de travail, complexes et simple, et deux types de travailleurs, qualifiés et non qualifiés. Les postes de travail complexe peuvent être occupés seulement par les travailleurs qualifiés alors que les postes simples peuvent être occupés par les deux types de travailleurs. Les travailleurs qualifiés en postes simples continuent à chercher du travail dans le marché complexe pendant leur temps libre. Le procès de matching est représenté par des fonctions de matching à la Pissarides. Les intensités de recherche de l'emploi sont endogènes. Les modèle, calibré sur l'économie belge, reproduit de façon satisfaisante l'augmentation du chômage et la stabilité des salaires relatifs observés en Belgique pendant les dernières décades. Le chapitre 3 étend ce cadre théorique à un modèle de croissance endogène où le progrès technologique incorporé et désincorporé sont différenciés et endogèneisés à travers d'un procès de learning-by-doing fondé sur l'accumulation du capital. Le nouveau modèle fourni une représentation réaliste du marché de travail et il considère en même temps le sujet de la croissance. Le chapitre 4 analyse les effets des changements technologiques et organisationnels au sein des firmes sur les flux de travail de différentes catégories professionnelles. Les résultats empiriques, obtenus à partir d'une base de données française, suggèrent que l'introduction des TIC augmente les flux de travail des travailleurs manuels et les employés, alors que la plupart des nouvelles pratiques organisationnelles stimulent les flux de travail des cadres.

Cette thèse cherche à expliquer les origines des fluctuations sur le marché du travail, à évaluer le coût de ses fluctuations et à comprendre si la politique monétaire doit chercher à les stabiliser. Notamment elle aborde plusieurs questions. Premièrement, quelles forces sous-tendent les fluctuations du marché du travail ? Ces forces trouvent-elles leur origine sur le marché du travail ? Deuxièmement, le marché du travail a-t-il tendance à amplifier ou atténuer l'effet de ces « chocs » sur l'activité économique ? Finalement, quel est le coût de ces fluctuations et quel rôle doivent jouer les politiques de stabilisation économique, notamment la politique monétaire ? Le premier chapitre cherche à répondre à la première question. Il identifie séparément deux chocs trouvant leur origine sur le marché du travail, un choc d'offre de travail et un choc sur le pouvoir de négociation des salariés, et quantifie leurs contributions respectives aux fluctuations d'un certain nombre de variables macroéconomiques au sein d'un modèle Vector Auto Regressive (VAR). Les deux chocs sont identifiés à l'aide de restrictions de signe. Le résultat principal de cette analyse est que les deux chocs expliquent une part importante des fluctuations de la production et du chômage à court terme comme à long terme. Le deuxième chapitre s'intéresse à la littérature sur les rigidités de salaire. Il montre qu'une forme analytique simple pour le salaire réel peut être obtenue à partir d'un modèle de négociations salariales à offres alternées à la Hall et Milgrom (2008) lorsqu'une restriction paramétrique plausible est imposée. Le troisième chapitre cherche à comprendre comment la nature des fluctuations du chômage affecte la conduite optimale de la politique monétaire. Il montre qu'en présence de fluctuations du chômage asymétriques, l'arbitrage de politique monétaire entre la stabilisation de l'inflation et la stabilisation du chômage décrit par Taylor (1994) devient un arbitrage entre la stabilisation de l'inflation et le chômage moyen. Dans ce cadre, il est préférable pour une banque centrale de mettre un poids important sur la stabilisation de l'activité réelle. En adoptant cette politique plutôt qu'une politique de stabilité des prix, l'autorité monétaire peut générer des gains de bien-être conséquents. / The goal of this thesis is twofold: (1) uncover the sources of labor market fluctuations and evaluate their costs, (2) understand whether monetary policy should be concerned with stabilizing these fluctuations. More precisely, it addresses a certain number of intertwined questions. First, which disturbances underlie labor market fluctuations? Do they find their origin within or outside the labor market? Second, are there key characteristics of the labor market that tend to amplify or dampen the effects of these shocks on economic activity? Third, how costly are these fluctuations, and what does this imply for stabilization policies, especially monetary policy? The first chapter addresses the first question. It identifies and quantifies the importance for economic fluctuations of two labor market shocks, a labor supply shock and a wage bargaining shock, within a Vector Auto Regressive (VAR) mode!. The shocks are identified with sign restrictions. The main result that emerges from this analysis is that both shocks are important for output and unemployment fluctuations in the short run and in the long run. The second chapter is related to the literature that argues that wage rigidity is key to explaining the size of labor market fluctuations. It derives an analytical solution for the wage from an alternating-offer wage bargaining game à la Hall and Milgrom (2008) under a plausible parameter restriction. The third chapter addresses the third question. It tries to understand how the nature of unemployment fluctuations shapes the optimal design of monetary policy. It shows that, when unemployment fluctuations are asymmetric, the standard macroeconomic trade­-off between inflation and unemployment stabilization becomes a trade-off between inflation stabilization and average unemployment. In this environment, it is optimal for the central bank to adopt a dual mandate, that is, a policy that features a strong response to employment alongside inflation. The welfare gains of adopting this policy rather than a policy of price stability are found to be substantial.

Text in Afrikaans / Suid-Afrika ondervind reeds geruime tyd hoe en stygende vlakke van werkloosheid. Gedurende die tagtigerjare bet die opkoms van vakbonde 'n fundamentele herstrukturering van die Suid-Afrikaanse arbeidsmark veroorsaak en die styging in werkloosheid gedurende die tydperk word dikwels aan vakbondoptrede toegeskryf. In die studie word verskillende oorsake van werkloosheid aan die hand van die klassieke, Keynesiaanse, natuurlike werkloosheidskoers- en nie-versnellende-inflasiewerkloosheidskoersbenaderings ondersoek ten einde die invloed van vakbonde en loononaanpasbaarheid op werkloosheid te probeer bepaal. Ooreenkomste sowel as verskille tussen die teoriee word geidentifiseer. Dit wil voorkom asof vakbonde gedurende die tagtigerjare in Suid-Afrika deur middel van bulle invloed op . loonverhogings 'n betreklik geringe invloed op werkloosheid gehad bet en dat loononaanpasbaarheid geensins 'n beduidende faktor was nie. Dit blyk ook dat die Keynesiaanse benadering die toepaslikste raamwerk hied vir die ontleding van hoe vlakke van werkloosheid en die invloed van vakbonde daarop. · / High and rising levels of unemployment have been experienced in South Africa for quite some time. The rise in trade union activity during the eighties caused a fundamental restructuring of the South African labour market and the increase in unemployment during this period is often blamed on trade union activity. In this study the classical approach, the Keynesian approach, the natural rate of unemployment and the non-accelerating inflation rate of unemployment are used to examine the different causes of unemployment with the purpose of assessing the influence of trade unions and wage rigidity on the level of unemployment. Similarities as well as differences between the theories are identified. It appears that trade unions had a marginal effect on unemployment in South Africa during the eighties through their influence on wage increases and that wage rigidity was not a significant cause of unemployment during this period. The Keynesian approach seems to be the most appropriate framework to analyse the causes of high levels of unemployment as well as the influence of trade unions on unemployment. / Department of Economics / M. Comm (Economics)

Die vorliegende Dissertation besteht aus vier Aufsätzen, die sich mit Fragen des Außenhandels und der Arbeitsmarktökonomie auseinandersetzen. Der erste Aufsatz untersucht in einem internationalen Oligopol die Interaktion zwischen Handelsliberalisierung, Produkt- und Prozessinnovationen und der relativen Nachfrage nach niedrig qualifizierten Arbeitnehmern. Der Abbau von Handelsschranken führt zu einer Verschärfung des Wettbewerbs, auf die die konkurrierenden Firmen reagieren, indem sie ihre Investitionen in Produkt- und Prozessinnovationen ausweiten. Infolgedessen sinkt die Nachfrage nach niedrig qualifizierten Arbeitnehmern. Der zweite Aufsatz analysiert die Wirkung eines einseitigen Mindestlohnes in einem Zwei-Länder-Modell, in dem Firmen den ausländischen Markt entweder durch Exporte oder durch lokale Tochterfirmen bedienen. Eine Liberalisierung des Handels erhöht die negativen Beschäftigungseffekte von Mindestlöhnen. Dagegen begrenzt die Existenz von multinationalen Unternehmen den durch Mindestlöhne verursachten Arbeitsplatzabbau. Der dritte Aufsatz untersucht, wie sich kollektive Tarifverhandlungen bei freiem Marktzutritt auf die Produktivität und den wirtschaftlichen Erfolg von heterogenen Firmen auswirken. Zentrale Lohnverhandlungen verschärfen den Auswahlprozess und erhöhen die durchschnittliche Produktivität und den Gewinn überlebender Firmen. Stattdessen begünstigen dezentrale Tarifverhandlungen weniger produktive Firmen. Sind die Firmen internationalem Wettbewerb ausgesetzt, so können auch zentrale Tarifverhandlungen die Produktivität reduzieren. Der vierte Beitrag untersucht empirisch die Auswirkungen von Offshoring auf Arbeiterflüsse in Deutschland. Während Offshoring die Stabilität von Beschäftigungsverhältnissen in der verarbeitenden Industrie nicht beeinflusst, geht es einher mit einer Zunahme der Beschäftigungsstabilität im Dienstleistungssektor. Die Effekte von Offshoring hängen ferner stark vom Alter und der Bildung des einzelnen Arbeitnehmers ab. / This dissertation consists of four essays that contribute to the literature on international trade and labour markets. The first essay studies the interaction between economic integration, product and process innovation, and relative skill demand in a model of international oligopoly. As trade barriers are dismantled foreign competition intensifies. Competing enterprises respond by investing more aggressively in both product and process innovation. The relative demand for unskilled workers decreases as a result. The second essay studies labour market outcomes in a model of intra-industry trade between a rigid-wage Europe and a flexible-wage America. Firms can choose to serve the foreign market either through exports or through local subsidiaries. The essay demonstrates that the adverse employment effects of a unilateral wage floor increase significantly when trade barriers are removed. Multinational firms mitigate the adverse employment effects of one-sided wage rigidity. The third essay analyses how different unionisation structures affect firm productivity and firm performance in a monopolistic competition model with heterogeneous firms and free entry. While centralised bargaining induces tougher selection among heterogeneous producers and increases average productivity and profit levels, firm-level bargaining allows less productive entrants to remain in the market. The positive effect of centralised bargaining on average productivity can, however, be overturned when firms face international low-wage competition. Finally, the fourth chapter analyses empirically the effect of offshoring on workers'' labour market transitions in Germany. The results suggest that the effects of offshoring are strongly age- and skill-specific and also vary between sectors. While offshoring does not affect overall job stability in the manufacturing sector, it is associated with an increase in overall job stability in the service sector.