The Effects of Retail Regulations on Prices Evidence form the Loi Galland

In 1997, a new legislation banning below-invoice retail prices came into force in France. Individually negotiated discounts could no longer be passed on to consumers, which is equivalent to allowing industry-wide price oors. The anti-competitive effects of such practices are well-known. The elimination of intra-brand competition is expected to lead to a sharp increase in the retail prices. Using CPI raw data, we nd evidence supporting this claim. The modification or revocation of the existing legislation (as it has been done in Ireland in December 2005) would then be expected to reduce retail prices.retail prices, pricing regulations, resale price maintenance

Job creation, job destruction and international trade : an empirical analysis of French manufacturing firms between 1986 and 1992

This paper provides an empirical analysis at the firm level of the link between international trade and employment, for French manufacturing firms across the period 1986-1992, for which homogenous data are available. Firms constantly involved in international trade throughout the period experience higher job destruction rates, or lower job creation rates, than those that are not. The same firms also contribute massively to the observed decrease in the share of production labour in overall employment, and to the decrease in the share of unskilled labour in production labour. However, the firms constantly involved in international trade through imports or exports turn out unsurprisingly to be the biggest firms. A simple analysis based on creation and destruction rates therefore fails to disentangle the size and international trade effects. An analysis of variance of the link between flows of international trade and firm employment, conditional on size as well as industry affiliation, shows that contrary to exports, imports are accompanied by a decrease in firm employment. In particular, imports of so-called « final goods », capturing the outsourcing abroad of part of the firms local production activities, are shown to have the strongest relationship with the decrease in total employment, as well as (unskilled) production employment. However, the empirical analysis of the link between exports and employment proves relatively unconclusive, for lack of data on horizontal foreign direct investment. Finally, controlling for firm technological innovation throughout the period does not alter the conclusions obtained on international trade.international trade, labour demand, skills

How do firms respond to cheaper computers? Microeconometric evidence for France based on a production function approach

The continuous innovation process experienced by the information technology industries over the last decades has caused the price of computer power to decrease dramatically. This has led many firms to invest massively in increasingly efficient computers. This paper is an attempt to assess the impact of the fall of the cost of this particular input, on the performances of firms in terms of marginal cost, aggregate labor demand and employment by skill. Unlike most studies dealing with the technological bias issue, most of which rely on the estimation of factor demand equations, our evaluation of the complementarities between computers, skilled and unskilled labor rests on the sole estimation of a production function. We define a set of parameters of interest, depending on the observations and on the structural parameters of the production function, enabling us to examine the impact of the computer price decrease on marginal cost, labor demand and the relative demand for skills. Using a panel of more than 5000 continuing French firms followed between 1994 and 1997, we estimate a translog production function and find that the effects of the decrease in the price of computers have been large, both in terms of marginal cost reduction and in terms of skill structure. A 15% fall of the computer price should lead to a decrease of around 0.7% in the marginal cost of production and to a rise of about 3.5% of the skilled to unskilled ratio, other input prices being held fixed.Computers, production function, marginal cost, factor demands, technological bias

Downward Wage Rigidity: a Micro-Level Empirical Analysis for France in the 90s

We use microdata to examine the existence of downward wage rigidity in France, during the second half of the 90s. We use three annual datasets : a sample of the Déclarations Annuelles de Données Sociales, the Fiscal Income Survey and the Labour Force Survey. The first two sources, compiled on behalf of the fiscal administration, are reputed to be more accurate than the last one, subject to the traditional limitations of household surveys. Indeed, we show a tendency to underdeclaration as well as massive rounding to be present in the LFS wage measure. According to standard economic analysis, wages reflect individual productivity. All mechanisms reducing the transmission of productivity shocks to wages induce by definition wage rigidity. In practice, the presence and extent of wage rigidity must be deduced from the comparison between the actual wage evolution and some « reference evolution » observed in the absence of rigidity. A classical identifying assumption holds that downward wage rigidity transforms negative variations in the reference distribution into zero variations in the actual distribution, thus inducing a spike at zero in the latter. In French data, only the LFS exhibits such a spike, which seems to stem solely from reporting errors. We investigate the presence of more complex downward wage rigidity, by testing for the symmetry of the response of wages to positive and negative productivity shocks. For that purpose, we match the employee files with a firm level dataset (Bénéfices Réels Normaux). Results suggest that wages adjust less completely in the case of negative shocks. Although this asymmetry is shown to decrease with the initial wage level, wage rigidity cannot be reduced to the sole presence of a minimum wage. In particular, it is also shown to be higher for executives, and increasing in the local rate of unemployment.Wage rigidity, Measurement errors

Is the transmission of crude oil prices to gasoline prices asymmetric?

This paper provides evidence based on French macroeconomic data, that shocks on the cost of oil inputs are transmitted asymmetrically to the prices of fuel. We use an error correction model to estimate the dynamics of the transmission of the cost of crude oil expressed in French currency, to the production and before taxes retail prices of several kinds of fuel. We simulate the responses of the production and retail prices to positive as well as negative shocks affecting the cost of crude oil for three kinds of fuel: premium, diesel oil and domestic fuel oil. We also test for the presence of asymmetries in the transmission of crude oil to retail prices for two kinds of unleaded premium. The results for all five products robustly point to the existence of an asymmetry in the overall transmission of positive and negative cost shocks to prices, in the sense that crude oil cost increases are added to retail fuel prices faster than decreases are substracted. In the case of diesel oil, the asymmetry turns out to be significant at the production as well as the distribution stages. For domestic fuel oil, however, only firststage (production) asymmetries are significant, whereas for premium only secondstage (distribution) asymmetries may be robustly pointed out. Finally, measured asymmetry lengths range from one month to one quarter.prices, oil, asymmetry, error correction models, bootstrap

Firms' Main Market, Human Capital and Wages

Recent international trade literature emphasizes two features in characterizing the current patterns of trade: efficiency heterogeneity at the firm level and quality differentiation. This paper explores human capital and wage differences across firms in that context. We build a partial equilibrium model predicting that firms selling in more-remote markets employ higher human capital and pay higher wages to employees within each education group. The channel linking these variables is firms’ endogenous choice of quality. Predictions are tested using Spanish employer-employee matched data that classify firms according to four main destination markets: local, national, European Union, and rest of the World. Employees’ average education is increasing in the remoteness of firm’s main output market. Market–destination wage premia are large, increasing in the remoteness of the market, and increasing in individual education. These results suggest that increasing globalization may play a significant role in raising wage inequality within and across education groups