Exports and labor costs: evidence from a French policy |
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Authors: | Clément Malgouyres Thierry Mayer |
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Institution: | 1.Institut des Politiques Publiques (IPP),Paris,France;2.Sciences Po, Banque de France, CEPII and CEPR,Paris,France |
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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. |
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