Rev World Econ (2018) 154:429–454
Exports and labor costs: evidence from a French policy
· Thierry Mayer
Published online: 29 May 2018
© Kiel Institute 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 depend-
ing 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 consist-
ent 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 expla-
nations for our results as well as their implications.
Keywords Labor costs · Firm-level exports · Competitiveness
This work is supported by a public grant overseen by the French National Research Agency (ANR)
as part of the “Investissements d’Avenir” program within the framework of the LIEPP center of
excellence (ANR11LABX0091, ANR 11 IDEX000502). This work is supported by a public grant
overseen by the French National Research Agency (ANR) as part of the “Investissements d’avenir”
program (reference : ANR10EQPX17, Centre d’accès sécurisé aux données CASD). This research
has received funding from the European Research Council (ERC) under the Grant Agreement No.
313522. Part of this research was carried out when Clément Malgouyres was working at the Banque
de France. The views expressed here are those of the authors only and do not necessarily reﬂect the
views of the Banque de France or the Eurosystem. We thank two anonymous referees as well as the
editor for very helpful comments.
* Thierry Mayer
Institut des Politiques Publiques (IPP), Paris, France
Sciences Po, Banque de France, CEPII and CEPR, Paris, France