Working papers

We study the role of Export Credit Agencies—the predominant tool of industrial policy—onfirms’ behavior by using the effective shutdown of the Export-Import Bank of the United States(EXIM) from 2015–2019 as a natural experiment. We show that a 1% reduction in EXIM tradefinancing reduces exports in an industry by 4% to 5%. The impact on firms’ total revenuesimplies that the export shock has positive pass-through to domestic sales, and firms contractinvestment and employment. These negative effects for the average firm are amplified by increasedcapital misallocation across firms as those with higher ex-ante marginal revenue productof capital contract more. We model the effect of EXIM trade financing as lowering two typesof input cost wedges exporters might face: an exporting firm financing friction, and an importermarket friction. We show that both frictions are empirically relevant, indicating thateven in well-developed financial markets, the supply of trade financing is plausibly constrained.These results provide a framework for the conditions under which Export Credit Agencies canboost exports and firm growth, and can act as a tool of industrial policy without leading to amisallocation of resources.

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Does reducing the cost for entrepreneurs to write more complete contracts with their financiers enhance entrepreneurial success? To shed light on this question, this paper exploits a 2008 French reform that made it less costly for new firms to choose a legal form allowing more complete financial contracts in the company bylaws. Using comprehensive tax-filing data from 2004 to 2015, we find a marked increase in the adoption of that legal form among new firms, leading to higher growth in capital, labor, and revenues in the first three years after creation. The effects are more pronounced for firms with high marginal returns to capital, suggesting that capital misallocation decreases. Our findings highlight the significant role of legal and financial structures in entrepreneurial success, which has policy implications for promoting entrepreneurship.

This paper investigates the 2013 three-fold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008--2017 and a quasi-experimental setting, we find that firms swiftly cut dividend payments and used this tax-induced increase in liquidity to accumulate more capital and labor, resulting in higher revenues. Heterogeneity analyses show that firms with high demand and returns to capital responded most, while no group of treated firms reduced their capital. Our results reject models in which higher dividend taxes increase the cost of capital and show that the tax-induced increase in liquidity relaxes financial constraints, which can reduce capital misallocation.

Innovation booms are often fueled by easy financing that allows new technology firms to pay high wages that attracts skilled labor. Using the late 1990s Information and Communication Technology (ICT) boom as a laboratory, we show that skilled labor joining this new sector experienced sizeable long-term earnings losses. We show these earnings patterns are explained by faster skill obsolescence rather than either worker selection or the overall bust in the ICT sector. During the boom, financing flowed more to firms whose workers would experience the largest productivity declines, amplifying the negative effect of labor reallocation on aggregate human capital accumulation.

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Media coverage: Voxeu, Frankfurter Allgemeine Zeitung

We quantify how banks’ funding-related expenses affect their lending behavior. For identification, we exploit banks’ heterogeneous liability composition and the existence of regulated deposits in France whose rates are set by the government. Using administrative credit-registry and regulatory bank data, we find that a one-percentage-point increase in average funding costs reduces banks’ credit supply by 17%. To insulate their profits, banks also reach for yield and rebalance their lending towards smaller and riskier firms. These changes are not compensated for by less affected banks at the aggregate city level, which implies that firms have to reduce their investment.

Formally independent private banks change their supply of credit to the corporate sector for the constituencies of contested political incumbents in order to improve their reelection prospects. In return, politicians grant such banks access to the profitable market for loans to local public entities among their constituencies. We examine French credit registry data for 2007--2017 and find that credit granted to the private sector increases by 9%-14% in the year during which a powerful incumbent faces a contested election. In line with politicians returning the favor, banks that grant more credit to private firms in election years gain market share in the local public entity debt market after the election is held. Thus we establish that, if politicians can control the allocation of rents, then formal independence does not ensure the private sector's effective independence from politically motivated distortions.

Media coverage: Le Monde, France Culture, Liberation, Alternatives Economiques ; Les Echos