French Firm-level Data Research Articles

The impact of forest management certification on exports in the wood sector: Evidence from French firm-level data

Forest certification, originally introduced to promote sustainable forest management and protect forests from threats such as deforestation, has become a large-scale market tool. There is no consensus in the literature on the impact of forest certification on exports. Few studies have analyzed the impact of forest management certification on exports, and none have analyzed this effect at the firm level, taking into account firm heterogeneity. The current paper aims to fill this gap by analyzing the impact of the difference in the level of forest management certification between an exporting country and importing or destination countries. In particular, we determine how this impact differs by firm size. Our study focuses on the Programme for the Endorsement of Forest Certification (PEFC). We use a panel of exports of wood and wood products at the level of French firms. We find that when the level of forest management certification in the exporting country increases relative to that of the importing countries, exports increase; but this occurs to a lesser extent as firm size increases. This result is robust to the various additional analyses. For example, an increase in the difference in the share of PEFC-certified forests by 0.15 is associated with a 90% increase in the value of exports. We also find heterogeneity by product category, geographic area, and income level of destination countries. Our study highlights the role played by forest certification on exports and the need to develop forest certification in a market-driven manner.

Productivity slowdown and tax havens: Where is measured value creation?

Based on French firm-level data, we evaluate the contribution of the micro-level profit-shifting –through tax haven foreign direct investments– to the aggregate productivity slowdown measured in France. We show that firm measured productivity in France declines over the years following the establishment in a tax haven, with an average estimated drop by 3.5% in apparent labor productivity. To isolate the contribution of multinational enterprises' (MNEs) tax optimization to the decline in productivity, we then exploit the 2006 Cadbury-Schweppes decision of the European Court of Justice limiting the extent to which member States can counter European MNEs' tax planning strategies. We find that multinational groups benefiting from that loosening of the legal constraints do exhibit a lower labor productivity following that ruling. Finally, given these firms' weight, our results imply an annual loss of 5.7% in terms of the aggregate annual labor productivity growth.

Productivity Slowdown, Tax Havens and MNEs’ Intangibles: Where is Measured Value Creation?

Based on French firm-level data over 15 years we evaluate the contribution of the microlevel profit shifting –through tax haven foreign direct investments to the aggregate productivity slowdown measured in France. We show that firm measured productivity in France declines over the immediate years following the establishment in a tax haven, with an average estimated drop by 3.5% in labor apparent productivity. We argue that this productivity decline, following a presence in a tax haven, is most likely explained by multinationals’ tax optimization, where domestic productivity is underestimated as profits are not recorded anymore in the home country. The fall in productivity is especially strong for firms that are intensive in intangible capital and is equivalent to 4.1% (versus 2.7% for low intangible intensive firms), reflecting the fact that these types of assets are more easily shifted across countries and facilitate tax planning. Our results additionally suggest that the mismeasurement has strong dynamic effects, as the decline becomes more important the longer the firm remains in a tax haven.Finally, given these firms’ weight in the economy, our results imply an 8% loss at the aggregate in terms of the level of the labor productivity throughout the whole sample period, which is equivalent to an annual loss of 9.7% in terms of the aggregate annual labor productivity growth.

Estimating bargaining-related tax advantages of multinational firms

The effective corporate profit tax rates (ETRs) of multinational enterprises (MNEs) are in general lower than those of national enterprises (NEs). In this paper, we argue that the bargaining power of MNEs is an important factor in explaining these differences beyond profit shifting. First, larger and more profitable firms are more valuable for tax authorities through, e.g., higher tax revenues and employment. In threatening to move their operations to other jurisdictions, larger firms, and specifically MNEs, may be able to extract greater tax deductions. This results in a regressive ETR schedule for MNEs and NEs. Second, MNEs face arguably lower costs to relocate their business (or profits) to foreign countries with a lower tax rate than NEs. This improves MNEs' threat point in bargaining and enables them further to extract higher tax deductions than NEs. To empirically quantify the importance of bargaining on the tax gap between MNEs and NEs, it is elemental to rigorously condition on the determinants of MNE status, profit taxation, as well as possible profit-shifting activities. To that end, we use French firm-level data and entropy balancing on the joint determinants of MNE status (including the possibility of profit shifting) and a firm's ETR. We find that the empirical regressivity of the French tax schedule reduces French MNEs' ETRs by 2.52 percentage points on average due to their larger size, while the relocation threat of the same firms reduces their ETR by 3.58 percentage points relative to comparable NEs. The former is a tax advantage that any firm (MNE or NE) of the same size could obtain, while the latter is specific to MNEs and beyond the reach of NEs.

Firm Sorting and Agglomeration

To account for the uneven distribution of economic activity in space, I propose a theory of the location choices of heterogeneous firms in a variety of sectors across cities. In equilibrium, the distribution of city sizes and the sorting patterns of firms are uniquely determined and affect aggregate TFP and welfare. I estimate the model using French firm-level data and find that nearly half of the productivity advantage of large cities is due to firm sorting, the rest coming from agglomeration economies. I quantify the general equilibrium effects of place-based policies: policies that subsidize smaller cities have negative aggregate effects. (JEL D22, D24, R11, R32)

Estimating Bargaining-Related Tax Advantages of Multinational Firms

The effective corporate profit tax rates (ETRs) of multinational enterprises (MNEs) differ from those of national enterprises (NEs). In this paper, we argue that the bargaining power of MNEs is an important factor in explaining these differences beyond profit shifting. First, larger and more profitable firms are more valuable for various reasons (in terms of absolute tax revenues, employment, etc.) for tax authorities. Thus, in threatening to move their operations to other jurisdictions, larger firms may be able to extract greater deductions. This potential bargaining advantage of larger firms may result in a regressive ETR schedule. As MNEs tend to be larger and more profitable than NEs, they may pay lower ETRs for merely size-related reasons. Second, MNEs face arguably lower costs to relocate their business (or profits) to foreign countries with a lower tax rate than NEs. This enhances their bargaining position even further when negotiating tax deductions. To quantify the importance of bargaining in the tax gap between MNEs and NEs, it is elemental to rigorously condition on the determinants of MNE status, profit taxation, as well as possible profit-shifting activities. To that end, we use French firm-level data and entropy balancing of the joint determinants of MNE status (including the possibility of profit shifting) and a firm's ETR. Empirically, we find that the empirical regressivity of the French tax schedule reduces French MNEs' ETRs by 2.52 percentage points on average due to their larger size, while the relocation threat of the same firms reduces their ETR by 3.58 percentage points relative to comparable NEs. The former is a tax advantage that any firm (MNE or NE) of the same size could obtain, while the latter is specific to MNEs and beyond the reach of NEs.

Adjustment Costs and Factor Demand: New Evidence from Firmss Real Estate

Adjustment costs impair the optimal allocation of production factor across firms. In this paper, we use the cost associated with corporate relocation to explore the effect of the adjustment costs of the premises size on factor demand. We rely on the tax on realized capital gains on real estate asset, which entails varying real estate adjustment costs across firms, to empirically study the effect of these frictions on firms' behaviour. We develop a general equilibrium model, with heterogeneous firms, that sheds light on the implication of the level of the fixed costs associated with the adjustment of real estate on the change in firms' labor demand following productivity shocks. This model predicts that employment growth of firms facing positive productivity shocks shrinks with the level of the frictions. Confronting these results using French firm-level data over the period 1994-2013, we find that higher adjustment costs constrain relocation and reduce job creation of the most dynamic firms. The highlighted frictions have noticeable macroeconomic effects.

Offshoring and Skill-Upgrading in French Manufacturing: A Heckscher-Ohlin-Melitz View

We present a factor-proportions trade model in which heterogeneous firms can offshore intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high-productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant countries than low-productivity firms. Differently from the traditional versions of factor-proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading to endogenous variation in skill intensity across firms that is positively correlated with firm productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical support for the factor proportions channel through which offshoring to labor-abundant countries affects the firm-level skill intensities of French manufacturers.

Production Factor Returns: The Role of Factor Utilization

Short-term increasing returns to production factors are usually found in empirical studies. We argue they can be due to omitted variables, particularly the intensity of factor utilization. Thanks to original French firm-level data (1992–2008), we show how increasing returns to scale disappear when working time, capacity utilization rate, and, particularly, capital operating time are introduced in the production function.

High-end variety exporters defying gravity: Micro facts and aggregate implications

We develop a new methodology to identify high-end variety exporters in French firm-level data. We find that they do not export to more countries, but they export to more distant destinations than low-end ones. We also show that in contrast to low-end exporters, distance has almost no effect on high-end variety export(er)s. Because of this lower sensitivity to distance at the micro-level, specializing in the production of high-end varieties has implications for the geography of aggregate exports. Specializing in high-end varieties allows for a greater geographic diversification of aggregate exports – in particular when demand arises from both neighboring and distant countries. It also makes a country better able to benefit from growth in remote destinations.

Offshoring and Skill-Upgrading in French Manufacturing: A Heckscher-Ohlin Melitz View

We present a factor-proportions trade model in which heterogeneous firms can offshore intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high-productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant countries than low-productivity firms. Differently from the traditional versions of factor-proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading to endogenous variation in skill intensity across firms that is positively correlated with firm productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical support for the factor proportions channel through which offshoring to labor-abundant countries affects the firm-level skill intensities of French manufacturers.

Cherries for sale: The incidence and timing of cross-border M&A

This paper develops a model of cross-border M&A activity that features firm-level productivity shocks and endogenous export activity. We show that foreign firms will be relatively more attracted to targets in the domestic country that had high productivity levels that induced them to invest in large export networks several years prior to acquisition, but subsequently experienced a negative productivity shock (i.e., cherries for sale). From the theory we derive a dynamic panel binary choice empirical model to predict cross-border M&A activity, and find strong evidence for our hypotheses connecting the evolution of firm-level productivity to the ultimate targets of cross-border acquisitions using French firm-level data.

French Firms Exports During Downturns: Evidence from Past Crises

This paper makes use of detailed French firm level data on a quarterly basis to investigate the impact of past crises on exports and the margins of adjustment. We first detect crises periods using quantitative criteria and classify them into banking crises, currency crises, simultaneous banking and currency crises, and other crises. Our results underline the prevalence of the intensive margin of adjustment to large shocks, i.e. firms reducing their average sales per product while staying on the market. The extensive margin of trade is however dominant in currency crises. On average, a crisis reduces the growth rate of exports over six quarters. Finally, we show that exports overreact to demand variations during crises, and that the extensive margin is more responsive to demand. Other factors, not directly related to demand, mostly affect the intensive margin.

Knocking on Tax Haven's Door: Multinational Firms and Transfer Pricing

This paper analyzes the transfer pricing of multinational firms. We propose a simple framework in which intra-firm prices may systematically deviate from arm’s length prices for two motives: i) pricing to market, and ii) tax avoidance. Multinational firms may decide not to avoid taxes if the risk to be sanctioned is high compared to the tax gap. Using detailed French firm-level data on arm’s length and intra-firm export prices, we find that both mechanisms are at work. The sensitivity of intra-firm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most importantly, we find almost no evidence of tax avoidance if we disregard exports to tax havens. Back-of-the-envelope calculations suggest that tax avoidance through transfer pricing amounts to about 1% of the total corporate taxes collected by tax authorities in France. The lion’s share of this loss is driven by the exports of 450 firms to ten tax havens. As such, it may be possible to achieve significant revenue increases with minimal cost by targeting enforcement.

CREDIT CONSTRAINTS AND THE CYCLICALITY OF R&D INVESTMENT: EVIDENCE FROM FRANCE

We use a French firm-level data set containing 13,000 firms over the period 1994-2004 to analyze the relationship between credit constraints and firms' RD (ii) this result is only observed for firms in sectors that depend more heavily upon external finance, or that are characterized by a low degree of asset tangibility; (iii) in more credit-constrained firms, R&D investment plummets during recessions but does not increase proportionally during upturns.

The effect of the incremental R&D tax credit on the private funding of R&D an econometric evaluation on french firm level data

We study, at the firm level, whether the incremental R&D tax credit increases the private funding of R&D. In order to answer this question, we use the yearly surveys of the Ministry of Research over the period 1993-2003, as well as the corresponding firm-level tax files. The main issue is whether the firms would have increased their R&D expenditures without this tax incentive. We make use of the Rubin methodology. In a first step, we study the determinants of the probability to benefit from the R&D tax credit, that is the selection process at work in the recipients' sample. We find that the probability to obtain a R&D tax credit increases with the R&D/Sales ratio and decreases with the direct R&D subsidies. Once we have evaluated the probability to get the R&D tax credit, we are able to correct for the selection bias. In a second step, we evaluate the effect of the incremental R&D tax credit on the private funding of research (once subtracted the direct subsidies from all the ministries). We find that, overall, the tax credit adds to the private funding of R&D: 1 Euro of tax credit would give slightly more than one Euro of total R&D. We also find that the incremental R&D tax credit increases the growth of the number of researchers.

Environmental regulation and French firms location abroad: An economic geography model in an international comparative study

In this study, we re-examine the pollution haven hypothesis by a fresh take on both its theoretical and empirical aspects. The originality of our work is twofold. First, we apply an economic geography model with the aim of deriving a rigorous specification for the impact of environmental regulation on firms' location choice. Second, we test a conditional logit model using French firm-level data in an international comparative study. We confirm evidence of a strong pollution haven effect for our pooled sample of countries receiving French direct investments. However, through a sensitivity analysis, we validate this finding for developed countries and most of emerging economies and Central and Eastern European countries, but not for most countries of the Commonwealth of Independent States and developing countries, where a more stringent environmental regulation seems to attract investments. Furthermore, we highlight a forward looking behavior of firms, in terms of their location decision-making.

How do Different Exporters React to Exchange Rate Changes?

This article analyzes the heterogeneous reaction of exporters to real exchange rate changes using a very rich French firm-level data set with destination-specific export values and volumes on the period 1995–2005. We find that high–performance firms react to a depreciation by increasing significantly more their markup and by increasing less their export volume. This heterogeneity in pricing-to-market is robust to different measures of performance, samples, and econometric specifications. It is consistent with models where the demand elasticity decreases with firm performance. Since aggregate exports are concentrated on high-productivity firms, precisely those that absorb more exchange rate movements in their markups, heterogeneous pricing-to-market may partly explain the weak impact of exchange rate movements on aggregate exports.

Production Factor Returns: The Role of Factor Utilisation

Short-term increasing returns to production factors are usually found in empirical studies. We argue they can be due to omitted variables, particularly the intensity of factor utilisation. Thanks to original French firm-level data (1992-2008), we show how increasing returns to scale disappear when working time, capacity utilisation rate and mainly capital operating time are introduced in the production function.

Access to New Imported Varieties and Total Factor Productivity: Firm Level Evidence from France

This paper aims at providing causal evidence on the effects of expanded imported varieties on total factor productivity (TFP) using French firm level data. Our strategy is to build an exact index of increase in varieties -using the Broda, Greenfield and Weinstein (2006) methodology. This index captures the impact of new varieties on total factor productivity within a Dixit-Stiglitz framework based on a Constant Elasticity of Substitution production function. We argue that measurement problems are central to the question we try to address. We deal with this issue using alternative instrumental variables strategies. First, we work with sectoral variety index in order to reduce the effect of outliers. Secondly, working with estimated bilateral imports rather than observed ones, we are able to adjust the variety index for measurement errors and find a strong impact of this index on TFP. New varieties that enter the production function appear as weakly substitutable- with an elasticity of substitution ranging from 1.25 and 1.5 - and conducive to significant TFP growth.