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Firm Size Distortions and the Productivity Distribution: Evidence from France

Luis Garicano (), Claire Lelarge and John van Reenen ()

No 18841, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show how size-contingent laws can be used to identify the equilibrium and welfare effects of labor regulation. Our framework incorporates such regulations into the Lucas (1978) model and applies this to France where many labor laws start to bind on firms with exactly 50 or more employees. Using data on the population of firms between 2002 and 2007 period, we structurally estimate the key parameters of our model to construct counterfactual size, productivity and welfare distributions. With flexible wages, the deadweight loss of the regulation is below 1% of GDP, but when wages are downwardly rigid welfare losses exceed 5%. We also show, regardless of wage flexibility, that the main losers from the regulation are workers (and to a lesser extent large firms) and the main winners are small firms.

JEL-codes: J08 L11 L25 L51 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-bec and nep-eff
Note: IO LS
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Published as Luis Garicano & Claire Lelarge & John Van Reenen, 2016. "Firm Size Distortions and the Productivity Distribution: Evidence from France," American Economic Review, American Economic Association, vol. 106(11), pages 3439-3479, November.

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Related works:
Journal Article: Firm Size Distortions and the Productivity Distribution: Evidence from France (2016) Downloads
Working Paper: Firm size distortions and the productivity distribution: evidence from France (2016) Downloads
Working Paper: Firm size distortions and the productivity distribution:evidence from France (2016) Downloads
Working Paper: Firm Size Distortions and the Productivity Distribution: Evidence from France (2013) Downloads
Working Paper: Firm Size Distortions and the Productivity Distribution: Evidence from France (2013) Downloads
Working Paper: Firm Size Distortions and the Productivity Distribution: Evidence from France (2012) Downloads
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