Research

Abstract: Governments frequently implement investment stimulus policies to foster capital accumulation, especially during downturns. While the literature has largely focused on how such policies effectively stimulate investment and output for investing firms, investment subsidies also generate a positive demand shock for the suppliers of subsidized goods. Capital-goods producers may respond by raising prices, thereby partially offsetting the intended user-cost reduction and capturing part of the policy-generated surplus. This paper studies these supply-side responses using the French “suramortissement” (2015–2017), a temporary extra-depreciation scheme targeting industrial equipment. Combining rich administrative and survey data, we document upstream price responses and reassess the effective reduction in the user cost of capital. We then build a model of incidence in a supply chain with imperfect competition, and translate our reduced-form estimates into a lower bound of the share of firm-level surplus accruing to capital producers. 

Abstract:  This paper studies the introduction in 2022 in seven French industries of a type of experience rating mechanism for unemployment insurance (UI) contributions. This mechanism was specific to the US before this reform. Under the French scheme, the firms' new UI contribution rate is an increasing function of their former separation rate, defined as the ratio of separations (end of labor contracts) to employment. Firms whose separation rate is above the industry median face a surtax compared to the pre-reform UI contribution rate, while the others face a reduced rate. Using a difference-in-difference method within treated industries, the results show that firms decrease significantly both their hiring and separation rates, with effects varying notably by firm size. Only the first year after the introduction of the scheme is studied in this paper, results should therefore be considered as valid only in the short run. Results show no significant effect on employment. Consistent with these findings, firms increase the average duration of their employment contracts.