This dissertation consists of three studies in international trade and monetary economics. The first and third chapters study the impact of labor market rigidities on multinational firms' choice between FDI and outsourcing. The second chapter proposes a model that explores one of the motivations for using Bitcoin.In the first chapter, I propose a two-country, two-sector model, where a firm's decision on offshoring depends on labor market rigidities, due to which firms need to bear not only wages, but also additional costs from the labor market. In this model, firms endogenously choose their organizational form, considering their productivity level and fixed organizational costs. The labor market cost generated by search frictions plays a key role in changing the variable benefits of each choice, and thus works as a key determinant in the process of selecting the organizational form for offshoring. The model has four different types of equilibria, depending on relative levels of two labor market costs (domestic and foreign) and the price of the intermediate input. In all equilibria, a relative rise in the domestic labor market cost increases the share of offshoring firms, while decreasing domestic integration. Furthermore, an economy with offshoring has a higher welfare level and a lower unemployment rate than autarky. The second chapter offers an explanation for how Bitcoin gained its success, by focusing on the anonymity of the Bitcoin transactions based on the Bitcoin system's peer-to-peer nature, among several other features that distinguish it from previous digital currency systems. In the model that I propose, there exist two currency markets, Bitcoin and Debit, and agents are heterogeneous in their anonymity concerns. This heterogeneity drives some agents to choose the Bitcoin market and others to choose the Debit market in the benchmark model. When I introduce the intermediaries, which accept Bitcoin for legal goods, the number of agents who choose the Bitcoin market increases, while the share of Bitcoin users engaged in illegal activities decreases.Finally, in the third chapter, I examine the key prediction that I make in the first chapter: the difference in labor market flexibility across countries can be a key determinant in a firm's offshoring decision. I use the data set for 2006 through 2012 from U.S. related-party trade data of 453 6-digit North American Industry Classification System (NAICS6) level goods from 137 countries. For the labor market flexibility index, I use the Global Competitiveness Report (GCR) by the World Economic Forum. The data yields supporting results for the first chapter: the U.S. intrafirm imports share is positively correlated with the industry productivity dispersion only in countries that have the most flexible labor market. The supporting results stand out more with the data on developing countries only, which are mostly host countries trading with U.S. multinationals.
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