This dissertation comprises three essays on trade, immigration, and labor market shocks. Its ultimate focus is to understand how domestic workers respond to and/or are affected by trade liberalization, immigration, and shocks to foreign labor markets. Depending on the purpose of each essay, workers are characterized as being identical, or as having different ages and abilities, or as possessing different skills. Each essay builds a theoretical model and undertakes its analysis by elucidating how asset values, wages, and/or unemployment change in general equilibrium.The first essay ``Trade, Welfare, and International Labor Market Spillovers'' examines welfare implications of trade liberalization and spillover effects of labor market shocks in a global economy. It proposes a two-country new trade theory framework with two types of labor (skilled and unskilled) combind with an imperfect labor market arising from country-specific real minimum wages. The model identifies two key forces that shape the results: i) external scale effects generating employment expansion among unskilled workers, and ii) wage effects arising from intensive use of skilled workers. The model provides three clear predictions. First, the introduction of trade results in a rise of wage inequality in both countries. Second, trade enhances welfare by lowering unemployment across countries only when external scale effects dominate. Third, when wage effects outweigh external scale effects, a country will be better off if the other country raises its minimum wage, but both countries will be worse off under unduly strong external scale effects in the global economy. The second essay ``Immigration, Firm Heterogeneity, and Welfare'' studies the impact of immigration on firm adjustment and on native workers' welfare. Heterogeneous immigrants are added to the standard monopolistic competition model with heterogeneous firms. Based on interaction between idiosyncratic firm productivity and immigrants who differ in terms of ability (or skill) and legality, the model shows: (i) under some reasonable conditions, the highest-productivity firms prefer highly-skilled immigrants relative to native workers despite high fixed cost, whereas the lowest-productivity firms are willing to employ illegal immigrants despite risk of being fined; (ii) illegal immigration lowers the productivity cutoff and, at the same time, highly-skilled immigration raises it via the exit/entry process of firms; (iii) immigration alters the equilibrium distribution of firms and average productivity, thereby influencing revenues and profits of average productivity firms; and (iv) average productivity affected by both types of immigration determines native workers' welfare in the long-run.Finally, the third essay ``Worker Heterogeneity and Adjustment to Trade Liberalization'' investigates trade liberalization's impact on heterogeneous workers. This essay focuses on the role of age together with ability of workers in a search and matching model of the labor market. In essence, the model shows that age and ability are substitutes. As a result, the asset value of an unemployed worker decreases as he/she ages, but increases in ability. When an economy enjoys a comparative advantage in the high-tech sector and protects the low-tech sector by tariff, trade liberalization reduces an unemployed worker's asset value in the low-tech sector and raises her/his asset value in the high-tech sector. The model explains that trade liberalization leads younger and/or abler workers who otherwise are stuck in the low-tech sector to switch sectors, although not all movers become winners, while simultaneously it forces older and/or less able workers to exit the labor force.
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