Exports and Labor Costs: Evidence from a French Policy

33 Pages Posted: 20 Feb 2018

See all articles by Clément Malgouyres

Clément Malgouyres

Paris School of Economics (PSE); Institut des politiques publiques (PSE)

Thierry Mayer

Sciences Po

Date Written: February 2018

Abstract

We investigate the role that labor costs hold in exporters' performance. To do so, we exploit a large-scale French reform that granted most firms a tax credit proportional to the wagebill of their employees paid below a given threshold. This policy effectively translated into a cut in labor cost whose magnitude varies depending on firm-specific wage structures. We use the predicted treatment intensity based on pre-reform composition of the labor force as an instrument for the actual policy-induced firm-level change in labor costs. Although our point estimates are consistent with commonly estimated firm-level trade elasticities combined with reasonable labor shares in total costs, coefficients are found to be very noisy, suggesting lack of robust evidence of a causal effect of the policy. We discuss several potential explanations for our results as well as their implications.

Keywords: competitiveness, firm-level exports, labor costs

JEL Classification: D04, F14, F16, H32

Suggested Citation

Malgouyres, Clément and Mayer, Thierry, Exports and Labor Costs: Evidence from a French Policy (February 2018). CEPR Discussion Paper No. DP12728. Available at SSRN: https://ssrn.com/abstract=3126242

Clément Malgouyres (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

Thierry Mayer

Sciences Po ( email )

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