Exports and labor costs: evidence from a French policy

Exports and labor costs: evidence from a French policy 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of World Economics Springer Journals

Exports and labor costs: evidence from a French policy

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Publisher
Springer Berlin Heidelberg
Copyright
Copyright © 2018 by Kiel Institute
Subject
Economics; International Economics; European Integration; Macroeconomics/Monetary Economics//Financial Economics; Political Economy/Economic Policy
ISSN
1610-2878
eISSN
1610-2886
D.O.I.
10.1007/s10290-018-0320-x
Publisher site
See Article on Publisher Site

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.

Journal

Review of World EconomicsSpringer Journals

Published: May 29, 2018

References

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