Justine Féliu - Research

Labor Markets and the Rise of Contractor Firms

Abstract: This paper examines how competition among contractor firms affects wages of both outsourced and in-house workers. Using matched employer-employee and balance-sheet data for France (2009–2021), I document substantial heterogeneity in outsourcing across labor markets: while the average share of employment at contractor firms remains stable, markets where outsourcing was already prevalent experience significant increases. This rise is driven mainly by a surge in the number of contractor firms, generating tougher competition in the outsourcing market. Exploiting a shift-share instrument based on firms’ initial employment composition, I find that a one-standard-deviation increase in exposure to outsourcing reduces contractor firms’ profit margins by about 13 percentage points and outsourced workers’ hourly wages by roughly 4%. In contrast, non-contractor firms benefit from stronger competition in the outsourcing market, experiencing higher profits, employment, and wages, which aggravates income inequality. To interpret these patterns, I develop a search-and-matching model with endogenous outsourcing and imperfect competition among contractor firms. Firms choose between outsourcing and in-house production given heterogeneous fixed costs, while contractor firms compete à la Cournot. The model shows that when fixed costs are high relative to in-house productivity, outsourcing becomes widespread and reductions in cost dispersion further expand outsourcing by lowering the price elasticity of demand. A competition shock through lower vacancy-posting costs at contractor firms generates increasing wage inequality as the employment composition shifted toward contractor firms and the tightness increases.

Presentations: Macro Seminar (PSE), Séminaire de l'ERUDITE (Créteil University), Brown Bag Seminar of Innovation Economics (Collège de France), Labor/Public Workshop (Sciences Po), 7th QMUL PhD Workshop in Economics and Finance, 24th Journées LAGV (AMSE)

Selected for the IZA@LISER Summer School in Labor Economics 2026

Corporate Taxation and Firm Dynamics co-authored with Gemma Harris (PSE)

Abstract: We propose that lower corporate tax rates can contribute to falling business dynamism by favoring large incumbent firms over potential entrants. Using firm balance-sheet data from France, we first document significant heterogeneity in implicit corporate tax rates across the firm size distribution and show that the corporate tax becomes regressive at the very top. Within industries, a tax rate of 2 percentage points (pp) lower on the largest firms by is associated with firm creation rates between 1 and 2 pp lower. We then use the 2017 corporate tax reform in France to estimate the dynamic effects of a corporate tax cut on firm entry. Leveraging variation across firm size and taxation regime at the industry level, we find that industries more exposed to the corporate tax cut experienced relatively lower firm entry in years following the implementation of the reform. Finally, we build a theoretical model of firm dynamics that accounts for heterogeneous responses across firms to changes in the statutory rate. While a corporate tax cut raises the expected after-tax profits of potential entrants, it also disproportionately benefits large incumbents, allowing them to increase their relative size and thus mark-up and market share. Average price increases as markups rise, leading to higher input costs and barriers to entry. When this indirect effect raising barriers to entry is strong enough, it outweighs the direct effect of higher expected after-tax profits for entrants and firm creation falls.

Presentations: Macro Seminar (PSE), International Tax Observatory Internal Seminar, HEC PhD Conference 2026