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.

A common complaint about tax systems is that they are too complex and several countries offer simplified regimes to subsets of taxpayers. But do such regimes simplify tax reporting or just make it easier to evade taxes? We use panel data on the universe of income tax returns in France and the introduction of simplified tax regimes for the self-employed to assess whether individuals’ shift towards these simpler tax regimes–among others, captured by substantial bunching below the eligibility thresholds–is driven by the desire for simplicity or by motives related to tax evasion. Tax evasion plays a significant role in explaining individuals’ attraction to simpler tax regimes. We develop a structural model to quantitatively assess the importance of simplicity and evasion motives. Our preferred estimates indicate a significant preference for tax simplicity, increasing in the degree of simplicity, ranging from 162 to 942 euros per year per self-employed individual, along with a sizable evasion 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.