Research

Abstract: We study a temporary investment subsidy in France that allowed firms to deduct 140% of the purchase cost of eligible assets over time. We first confirm that beneficiary firms responded by increasing investment. We then show that the French producers of eligible goods increased sales, employment, and pre-tax prices. Studies evaluating the impact of stimulus policies on the book value of investment may therefore overstate actual capital accumulation.

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.