Discussion paper

DP12728 Exports and labor costs: Evidence from a French Policy

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


Mayer, T and C Malgouyres (eds) (2018), “DP12728 Exports and labor costs: Evidence from a French Policy”, CEPR Press Discussion Paper No. 12728. https://cepr.org/publications/dp12728