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Exports and labor costs: evidence from a French policy

Clément Malgouyres () and Thierry Mayer ()

Review of World Economics (Weltwirtschaftliches Archiv), 2018, vol. 154, issue 3, 429-454

Abstract: 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: Labor costs; Firm-level exports; Competitiveness (search for similar items in EconPapers)
JEL-codes: H32 F14 F16 D04 (search for similar items in EconPapers)
Date: 2018
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