Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France

Philippe Askenazy, Thomas Breda () and Vladimir Pecheu ()
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Thomas Breda: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Vladimir Pecheu: AMU - Aix Marseille Université

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Abstract: The existence of a peak at 49 employees in the firm size distribution in France, followed by a permanent decrease in the number of firms has been the starting point of political discourses and academic studies on the cost of size-dependent regulations at 50-employee. These features of the distribution are visible when firm size is declared by employers in fiscal data but not when it is reconstructed from individual-level social security data. This working paper explores these differences both from statistical and institutional viewpoints. It provides evidence showing that a large proportion of employers manipulate the firm size they declare in their fiscal documents. This manipulation generates the particular shape of the size distribution in the fiscal data. We discuss the rationale for such behavior: the key point is that the under-declaration in fiscal data is not subject to substantial sanctions and it can allow firms not to comply with the labor law. Event studies and comparisons of firms below and above the 50-employee threshold suggest that this threshold may only have limited effects on firm performance or growth potential. Consequently the welfare costs of the regulations at 50-employee might be smaller than what was found by some of the studies that assume a perfect compliance with the law.

Keywords: Regulations; Firm size; Firm dynamics; Economic cost; Noncompliance Regulations; Non-compliance (search for similar items in EconPapers)
Date: 2022-03
New Economics Papers: this item is included in nep-bec
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03614750v1
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France (2022)
Working Paper: Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France (2022)
Working Paper: Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France (2022)
Working Paper: Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France (2022)
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