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Title: Exports and labor costs: Evidence from a French Policy

Author(s): Cl�ment Malgouyres and Thierry Mayer

Publication Date: February 2018

Keyword(s): competitiveness, firm-level exports and labor costs

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Malgouyres, C and Mayer, T. 2018. 'Exports and labor costs: Evidence from a French Policy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12728