DP12728 Exports and labor costs: Evidence from a French Policy
|Author(s):||Clément Malgouyres, Thierry Mayer|
|Publication Date:||February 2018|
|Keyword(s):||competitiveness, firm-level exports, labor costs|
|JEL(s):||D04, F14, F16, H32|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12728|
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.