Essays on European Labor Markets by Filipa

Chapter 1 examines whether immigrants gain a comparative advantage relative to natives in highly protected labor markets. This may be the case if immigrants, being new to the country, are less aware of employment protection regulations and less likely to claim their rights. I test this hypothesis drawing on evidence for the EU and on two natural experiments for Spain and Italy. The results suggest that stricter Employment Protection Legislation (EPL) does indeed benefit immigrants relative to natives. Stricter EPL is found to reduce employment and reduce hiring and firing rates for natives. By contrast, it has no effect on most immigrants and may even increase employment rates for those who have been in the country for a longer period. Chapter 2 is the product of joint work with Marcello Esteviio (IMF) and looks at the effect of the 35-hour workweek in France on wages, employment, dual job holdings and happiness. It explores the different timing of implementation of the shorter workweek in large and small firms to measure its causal effect. The results suggest that the reduction in hours did not succeed in increasing employment and generated a series of behavioural responses that are likely to have reduced welfare, as workers and firms tried to avoid the rigidities created by the reform. This suggests that the French government should increase the flexibility of workers and firms in setting hours of work. Chapter 3 is the product of joint work with Olivier Blanchard (MIT) and Francesco Giavazzi (UniversitA Commerciale Luigi Bocconi). Two main forces lie behind the large U.S. current account deficits: an increase in U.S. demand for foreign goods and an increase in foreign demand for U.S. assets. Both have contributed to steadily increasing current account deficits since the mid-1990s, accompanied by a real dollar appreciation until late 2001 and a real depreciation since. We develop a simple model of exchange rate and current account determination based on imperfect substitutability in goods and asset markets and use it to interpret the past and explore alternative future scenarios. We conclude that substantially more depreciation is to come against the yen, the renminbi, and the euro. Thesis Supervisor: Joshua Angrist Title: Professor of Economics Thesis Supervisor: Olivier Blanchard Title: Class of 1941 Professor of Economics To my parents and to Paul