Size-Dependent Regulations, Firm Size Distribution, and Reallocation

By François Gourio, Nicolas Roys. 2012

161 citations recorded by the source corpus.

In France, firms with 50 employees or more face substantially more regulation than firms with less than 50. As a result, the size distribution of firms is visibly distorted: there are many firms with exactly 49 employees. We model the regulation as the combination of a sunk cost that must be paid the first time the firm reaches 50 employees, and a payroll tax that is paid each period thereafter when the firm operates with more than 50 employees. We estimate the model using indirect inference by fitting the discontinuity of the size distribution. The key finding is that the regulation is equivalent to a combination of a sunk cost approximately equal to about one year of an average employee salary, and a small payroll tax of 0.04%. Our structural model fits well the discontinuity in the size distribution. Removing the regulation improves labor allocation across firms, leading in steady-state to an increase in output per worker slightly less than 0.3%, holding the number of firms fixed. However, if firm entry is elastic, the steady-state gains are an order of magnitude smaller.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/06f0d7cc1db0224b372fbdcbe9a6522db668d7fd

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Stéphane Carcillo
2. Pierre Cahuc
3. T. L. Barbanchon
4. Markus Poschke

In Economics and Econometrics

1. Stéphane Carcillo
2. Pierre Cahuc
3. T. L. Barbanchon
4. Markus Poschke
5. Yann Algan
6. Martin Halla
7. M. Lowe

Citations in the corpus

• INFORMALITY: CAUSES, CONSEQUENCES AND POLICY RESPONSES (2017, unknown): “One feature that stands out from the studies by Gourio and Roys (2012) and Cai and Pandey (2013) is the relatively small impact of size dependent regulations on overall productivity.”
• The Causes and Costs of Misallocation (2017, unknown): “Also, Gourio and Roys (2014) and Garicano, Lelarge, and Van Reenen (2016) study the effects of size-dependent labor regulations using plant-level data from France where firms with 50 or more employees face substantial additional labor regulations. definition of informality based on the institutions…”
• The Firm Size Distribution Across Countries and Skill-Biased Change in Entrepreneurial Technology (2018, methodology): “Finally, I compare the firm size distribution in Amadeus to that in French official data using the extremely detailed data on firm sizes for France reported in Gourio and Roys (2014).(13) Figure 2 compares the size distribution for firms with twenty to one hundred (12)Just as for the GEM data, diffe”
• The Effectiveness of Hiring Credits (2019, background): “This contrasts with the accumulation of rms just below the 50-employee threshold, as reported by Gourio and Roys (2014) and Garicano et al. (2013).”