Tax simplicity and heterogeneous learning

We study the effects of fiscal incentives for self-employment using new French tax data from 1994 to 2012. France serves as a good quasi-laboratory: It has three fiscal regimes - or modes of taxation - for the self-employed, which differ in their financial payoffs and in their administrative simplicity. These regimes have changed extensively over time - offering the opportunity to study how people learn about them and understand them. We find that the self-employed respond to the tax and administrative notches created by the eligibility thresholds: there is strong bunching right before the eligibility thresholds, which we use to estimate self-employed taxable income elasticities and the value of administrative simplicity. Even a small preference for administrative simplicity could explain the bunching observed. There is a sizable cost of tax complexity; agents are not immediately able to understand what the right regime choice is and there is evidence for costly learning over time. The cost of complexity is regressive because it affects mostly the uneducated, low income, and low skill agents. Agents who can be viewed as more informed and knowledgeable (e.g., the more educated or high-skilled) are more likely to make the correct regime choice and to learn faste

The heterogeneous impact of market size on innovation: evidence from French firm-level exports

We analyze how demand conditions faced by a firm impacts its innovation decisions. To disentangle the direction of causality between innovation and demand conditions, we construct a firm-level export demand shock which responds to aggregate conditions in a firm’s export destinations but is exogenous to firm-level decisions. Using exhaustive data covering the French manufacturing sector, we show that French firms respond to exogenous growth shocks in their export destinations by patenting more; and that this response is entirely driven by the subset of initially more productive firms. The patent response arises 3 to 5 years after a demand shock, highlighting the time required to innovate. In contrast, the demand shock raises contemporaneous sales and employment for all firms, without any notable differences between high and low productivity firms. We show that this finding of a skewed innovation response to common demand shocks arises naturally from a model of endogenous innovation and competition with firm heterogeneity. The market size increase drives all firms to innovate more by increasing the innovation rents; yet by inducing more entry and thus more competition, it also discourages innovation by low productivity firms

Exporting ideas: knowledge flows from expanding trade in goods

We examine the effect of entry by French firms into a new export market on the dynamics of their patents' citations received from that destination. Applying a difference-in-differences identification strategy with a staggered treatment design, we show that: (i) entering a new foreign market has a significant impact on the long-run flow of citations; (ii) the impact is mostly driven by the extensive margin; (iii) inventors in destination countries patent mostly in products that do not directly compete with those of the exporting firm; (iv) the spillover intensity decreases with the technological distance between the exporting firm and the destination

Semi-Structural VAR and Unobserved Components Models to Estimate Finance-Neutral Output Gap: JRC Working Papers in Economics and Finance, 2020/11

The paper assesses the impact of adding information on financial cycles on the output gap estimates for eight advanced economies using two unobserved components models: a reduced form extended Hodrick-Prescott filter, and a standard semi-structural unobserved components model. To complement these models, a semi-structural vector autoregression model is proposed in which only supply shocks are identified. The accuracy of the output gap estimates is assessed based on their performance in predicting recessions. The models with financial variables generally produce more accurate output gap estimates at the expense of increased real-time volatility. While the extended Hodrick-Prescott filter is particularly appealing for its real-time stability, it lags behind the two semi-structural models in terms of forecasting performance. The vector autoregression model augmented with financial variables features the best in-sample forecasting performance, and it has similar real-time prediction capabilities to the semi-structural unobserved components model. Overall, financial cycles appear to be relevant in Japan, Spain, the UK, and – to a lesser extent – in the US and in France, while they are relatively muted in Canada, Germany, and Italy.JRC.I.1-Monitoring, Indicators & Impact Evaluatio

Opposing firm-level responses to the China shock: horizontal competition versus vertical relationships

We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the horizontal shock is detrimental to firms' sales, employment and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the vertical shock on firms' sales, employment and innovation

Essais en économie : innovation, dynamique d'entreprises et cycles financiers

Cette thèse est constituée de trois chapitres indépendants. Le premier chapitre décrit comment l’évolution des marchés d’exportation d’une entreprise influe sur ses décisions d’innovation. Le deuxième chapitre analyse la façon dont les (petites) entreprises françaises réagissent à la réglementation fiscale régissant les trois régimes fiscaux auxquels elles peuvent prétendre. Le troisième chapitre détaille comment intégrer des informations sur les déséquilibres financiers dans différents modèles d'écart de production éclaire la position dans le cycle de 8 économies avancées.Le premier chapitre analyse dans quelle mesure l’évolution des marchés d’exportation d’une entreprise influe sur ses brevets. Les entreprises manufacturières françaises brevettent davantage lorsqu’elles sont soumises à un choc de demande étrangère, c’est-à-dire lorsque leurs marchés d’exportation croissent plus fortement de manière exogène. La hausse du nombre de brevets est perceptible deux à cinq ans après un tel choc de demande, mettant en évidence le temps nécessaire pour innover. Cet effet est entièrement imputable aux entreprises initialement les plus productives. Outre ses effets sur l’innovation, un choc de demande étrangère a un effet positif et immédiat sur les ventes et l’emploi des entreprises, et ceci quel que soit leur niveau de productivité. Cette réaction asymétrique de l'innovation à de même chocs de demande découle naturellement d'un modèle d'innovation et de concurrence endogènes avec hétérogénéité des entreprises.Le deuxième chapitre analyse la façon dont les entrepreneurs individuels français réagissent à un saut dans leur imposition, et en identifie les ressorts. Les indépendants français peuvent choisir entre trois régimes fiscaux, qui diffèrent chacun en termes d'incitations fiscales et de simplicité administrative. Dans les deux régimes les plus simples, beaucoup d'indépendants déclarent un chiffre d'affaires juste en dessous du seuil au-delà duquel les individus ne peuvent plus bénéficier de ces régimes. Les entrepreneurs réagissent aux incitations fiscales: la masse d'individus en excès juste en dessous du seuil est plus importante pour ceux qui ont un taux marginal d'imposition plus élevé. Plusieurs schémas de comportements suggèrent que ce regroupement d'individus observé tout près du seuil provient au moins pour partie de déclarations inexactes. Enfin, un modèle structurel de choix de régime confirme le rôle de la fraude et de la simplicité fiscale.Le troisième chapitre évalue comment prendre en compte les cycles financiers dans l’estimation de l’écart de production à l’aide de deux modèles à composantes inobservables -- un filtre Hodrick-Prescott élargi et un modèle semi-structurel -- et un modèle semi-structurel à vecteur autorégressif dans lequel seuls les chocs d’offre sont identifiés. Le crédit aux entreprises et les prix immobiliers permettent de capter l’influence de la sphère financière sur le cycle de l’économie qui ne se verrait pas sur inflation, utilisation des capacités de production ou chômage, les indicateurs usuels du cycle. La qualité de l’estimation de l’écart de production est évaluée à travers sa performance à prévoir les récessions. Les modèles avec variables financières produisent généralement des estimations de l’écart de production plus performantes au détriment d’une volatilité accrue en temps réel. Alors que le filtre HP élargi est très stable en temps réel, sa performance de prédiction est plus faible que celle des deux modèles semi-structurels. Le modèle à vecteur autorégressif avec variables financières présente les meilleures performances de prévision ex-post et des performances similaires au modèle semi-structurel à composantes inobservables en temps réel. Dans l’ensemble, les cycles financiers apparaissent importants au Japon, en Espagne, au Royaume Uni et, dans une moindre mesure, aux États-Unis et en France, alors qu’ils sont relativement contenus au Canada, en Allemagne et en Italie.This thesis is composed of three independent chapters. Chapter 1 describes how the demand conditions in their export markets shape French firms' innovation decisions. Chapter 2 analyses how (small) French firms react to a set of regulations of the different fiscal regimes that they can file in. Chapter 3 explains how adding financial information to standard output gaps models can help inform on the cyclical state of 8 advanced economies.The first chapter analyses how the evolution of a firm's export markets influences its innovation decisions. French manufacturing firms patent more when they are subject to a foreign demand shock, i.e. when their export markets exogenously grow more. The increase in the number of patents is visible two to five years after such a demand shock, highlighting the time needed to innovate. This effect is entirely attributable to the initially most productive firms. In addition to its effects on innovation, a foreign demand shock has a positive and immediate impact on the sales and employment of firms, regardless of their productivity. This skewed innovation response to common demand shocks arises naturally from a model of endogenous innovation and competition with firm heterogeneity. The market size increase drives all firms to innovate more by increasing the innovation rents; yet by inducing more entry and thus more competition, it also discourages innovation by low productivity firms.The second chapter analyzes how French self-employed individuals respond to a notch in their tax schedule, and identifies the motives behind that response. French self-employed can choose between three fiscal regimes, each of which differs in terms of tax incentives and administrative simplicity. In the two simplest regimes, the self-employed show a massive bunching just below the turnover threshold above which the individuals no longer qualify for those regimes. Entrepreneurs respond to tax incentives, as individuals with higher marginal tax rates bunch more. Many behavioral patterns suggest that this observed bunching comes at least to some extent from misreporting: just below the threshold, individuals report more often round numbers and appear to shift income to their partner when both are self-employed. In addition, individuals appear to learn over time how the system works -- and how to take advantage of it. Finally a structural model of regime choice, estimated by fitting data moments, confirms the role of tax evasion and tax simplicity.The third chapter assesses how to take into account financial cycles in the estimation of the output gap for eight advanced economies using two unobservable components models -- an extended Hodrick-Prescott filter and a semi-structural model -- and a semi-structural vector autoregression model in which only supply shocks are identified. Adding these financial variables (business credit or housing prices) makes it possible to capture the influence of the financial system on the business cycle that would not translate in inflation, capacity utilization rate or unemployment, the usual indicators of the cycle. The quality of the output gap’s estimate is assessed through its performance in predicting recessions. Models with financial variables generally produce better estimates of the output gap at the expense of increased volatility in real time. While the extended Hodrick-Prescott filter appears particularly attractive for its real-time stability, its predictive performance is weaker than that of the two semi-structured models. The vector autoregression model augmented with financial variables has the best ex-post prediction performance and similar performance to the semi-structural unobservable components model in real time. Overall, financial cycles appear to be important in Japan, Spain, the United Kingdom and, to a lesser extent, the United States and France, while they are relatively muted in Canada, Germany and Italy

Opposing firm-level responses to the China shock: output competition versus input supply

We decompose the “China shock” into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm level, we show that the output shock is detrimental to firms’ sales, employment, and innovation. Moreover, this negative impact is concentrated in low-productivity firms. On the other hand, the impact of the input supply shock is reversed

Evaluation of Equivalent Cladding Reacted parameters of Cr-coated claddings oxidized in steam at 1200 °C in relation with oxygen diffusion/partitioning and post-quench ductility

International audienceCr-coated M5(Framatome) cladding materials are studied and developed within the CEA-Framatome-EDF French nuclear fuel joint program as Enhanced Accident Tolerant Fuel claddings for Light Water Reactors. The objective of this paper is to bring some insights into the relationship between Equivalent Cladding Reacted (ECR) parameters, oxygen diffusion/partitioning and Post-Quench (PQ) ductility of Cr-coated M5(Framatome) fuel claddings oxidized in steam at 1200 degrees C.The physical meaning of the ECR parameter, evaluated experimentally from the measured Weight Gain (WG) or calculated using time and temperature correlations such as the Baker-Just (BJ) or Cathcart-Pawel (CP) kinetics correlations, is discussed in the light of the benefit brought by Cr coating to oxidation resistance of cladding. As shown in this article, when applied to the Cr-coated M5(Framatome) materials, the "experimental" ECR derived from WG does not have the same physical meaning than for the uncoated cladding materials. As discussed in the paper, this is fundamentally due to the use of the ECR as a surrogate for retained ductility for uncoated claddings, and to the differences between uncoated and Cr-coated cladding in the high temperature (HT) steam oxidation processes and partitioning of the oxygen between the different layers of the oxidized cladding.It is shown in this article that Cr-coated M5(Framatome) cladding brings significant additional time-at-temperature before full embrittlement of the cladding after one-sided oxidation at 1200 degrees C and quenching, compared to uncoated materials. The oxidation times and associated Baker-Just ECR (BJ-ECR) values, above which the cladding becomes brittle after low temperature quenching, are respectively ten times and three times higher than the ones for the uncoated reference cladding. When analyzing the PQ ductility of the Cr-coated M5(Framatome) cladding using a similar methodology as the one used to derive the ECR criterion for uncoated cladding, the 1e2% ductility limit corresponds to a BJ-ECR of about 50% or higher, for a 12-15 mm-thick Cr-coated cladding tested herein

Real and financial cycles in EU countries: Stylised facts and modelling implications

This paper studies the cyclical properties of real GDP, house prices, credit, and nominal liquid financial assets in 17 EU countries, by applying several methods to extract cycles. The estimates confirm earlier findings of large medium-term cycles in credit volumes and house prices. GDP appears to be subject to fluctuations at both business-cycle and medium-term frequencies, and GDP fluctuations at medium-term frequencies are strongly correlated with cycles in credit and house prices. Cycles in equity prices and long-term interest rates are considerably shorter than those in credit and house prices and have little in common with the latter. Credit and house price cycles are weakly synchronous across countries and their volatilities vary widely - these differences may be related to the structural properties of housing and mortgage markets. Finally, DSGE models can replicate the volatility of cycles in house and equity prices, but not the persistence of house price cycles