This paper presents new evidence on the economic incidence of wage subsidies by estimating their effects on wage and employment. I examine a large 2015 national-level reform in France, which increased financial support for low-income working households. Using administrative data and a shift-share IV design, I leverage variations in reform exposure across local labor markets stemming from differences in the socio-economic composition of the local working-age population. I find that local labor markets more exposed to an increase in wage subsidies experience an increase in the growth rate of hours worked. This surge in employment is associated with a decrease in the average hourly wage growth rate. Overall, there is no significant impact on total pre-tax labor earnings growth at the local level, as the effects on wages and employment are offsetting. These results suggest a pass-through of wage subsidies to wages equal to 28% on average.

We exploit individual panel information from introducing of new and simpler tax regimes for the self-employed in France, in order to assess the extent to which individuals’ shift towards the new regimes is driven by a quest for tax simplicity, and the extent to which the demand for tax simplicity is itself at least partly driven by tax evasion motives. We find evidence of a quest for tax simplicity from observing a significant amount of bunching at the eligibility thresholds for the simpler self-employment tax regimes and from the fact that bunching is increasing in the degree of simplicity of the self-employment regime. We also argue that tax evasion plays an important role in accounting for individuals’ attraction towards simpler tax regimes. Finally, we quantitatively assess the importance of simplicity and evasion motives for choosing a simpler self-employment regime. More precisely, we combine bunching estimates and a structural model to jointly estimate the real income elasticities, the value of tax simplicity, and the evasion elasticity. We find that the parameters values which generate the best fit with the observed bunching across different tax brackets and years, imply noticeable preference for tax simplicity with a sizeable evasion elasticity behind it, and a negligible real income elasticity.

This paper examines income inequality and dynamics in France, using exhaustive administrative panel data. We find that the market income distribution is highly unequal, with the top 1% receiving around 6% of the income. Income mobility is characterized by strong persistence at all income levels and for all age groups. We propose a non-parametric framework that accounts for differences in income risk along the market income distribution, revealing significant differences in income growth moments. Our findings indicate that the distribution of growth rates has high variance, excess skewness and is fat-tailed. In particular, we find a U-shaped pattern for income dispersion along the income distribution. We also investigate the role of redistribution as an insurance tool against income risk and find that transfers are particularly pivotal in reducing income risk for the lower part of the income distribution. We show substantial heterogeneity in income risk across locations, education and occupation groups, and the share of capital in total income. Our study provides new insights into the factors driving income inequality and dynamics in France and highlights the importance of the social-fiscal system in mitigating income risk.

In this paper, we investigate the role of firm bankruptcy procedures in worker and firm dynamics. These procedures aim to limit job destruction by offering firms and workers protection against temporary financial distress and fire sales. However, this is at the cost of a lower reallocation of workers to more productive firms. This paper explores the costs and benefits that workers experience when their employer enters bankruptcy, and how these affect the protection-reallocation trade-off and the design of optimal bankruptcy procedures. We use unique data on bankruptcy filings in France, matched with employer-employee administrative data, to document new facts on the dynamics of worker flows and earnings in distressed firms. To do so, we estimate the causal effect of entering in a more or less stringent bankruptcy procedure using an event-study strategy. Intuitively, the research design compares similar workers in comparable firms, but with one firm entering a bankruptcy procedure entailing its closure. Finally, we build a structural model based on (Guiso et al., 2005; Friedrich et al., 2019) to gauge the welfare effects of bankruptcy procedures.