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Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France

Author

Listed:
  • Philippe Askenazy

    (CMH - Centre Maurice Halbwachs - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - Département de Sciences sociales ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Thomas Breda

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Vladimir Pecheu

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract
The existence of a peak at 49 employees in the firm size distribution in France, followed by a permanent decrease in the number of firms has been the starting point of political discourses and academic studies on the cost of size-dependent regulations at 50-employee. These features of the distribution are visible when firm size is declared by employers in fiscal data but not when it is reconstructed from individual-level social security data. This working paper explores these differences both from statistical and institutional viewpoints. It provides evidence showing that a large proportion of employers manipulate the firm size they declare in their fiscal documents. This manipulation generates the particular shape of the size distribution in the fiscal data. We discuss the rationale for such behavior: the key point is that the under-declaration in fiscal data is not subject to substantial sanctions and it can allow firms not to comply with the labor law. Event studies and comparisons of firms below and above the 50-employee threshold suggest that this threshold may only have limited effects on firm performance or growth potential. Consequently the welfare costs of the regulations at 50-employee might be smaller than what was found by some of the studies that assume a perfect compliance with the law.

Suggested Citation

  • Philippe Askenazy & Thomas Breda & Vladimir Pecheu, 2022. "Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France," PSE Working Papers hal-03654324, HAL.
    • Handle: RePEc:hal:psewpa:hal-03654324
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03654324
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    References listed on IDEAS

    as
    1. Luis Garicano & Claire Lelarge & John Van Reenen, 2016. "Firm Size Distortions and the Productivity Distribution: Evidence from France," American Economic Review, American Economic Association, vol. 106(11), pages 3439-3479, November.
    2. Philippe Aghion & Antonin Bergeaud & John Van Reenen, 2023. "The Impact of Regulation on Innovation," American Economic Review, American Economic Association, vol. 113(11), pages 2894-2936, November.
    3. Philippe Aghion, 2021. "The impact of regulation on innovation," CentrePiece - The magazine for economic performance 607, Centre for Economic Performance, LSE.
    4. Philippe Askenazy & Thomas Breda & Vladimir Pecheu, 2022. "Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France," PSE Working Papers halshs-03614750, HAL.
    5. Ando, Sakai, 2021. "Size-dependent policies and risky firm creation," Journal of Public Economics, Elsevier, vol. 197(C).
    6. Gabriel Smagghue, 2022. "Heterogeneous Policy Distortions and the Labor Share," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 56-79, January.
    7. Nila Ceci-Renaud & Paul-Antoine Chevalier, 2010. "L'impact des seuils de 10, 20 et 50 salariés sur la taille des entreprises françaises," Économie et Statistique, Programme National Persée, vol. 437(1), pages 29-45.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Philippe Askenazy & Thomas Breda & Vladimir Pecheu, 2022. "Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France," PSE Working Papers halshs-03614750, HAL.
    2. Philippe Aghion & Antonin Bergeaud & John Van Reenen, 2023. "The Impact of Regulation on Innovation," American Economic Review, American Economic Association, vol. 113(11), pages 2894-2936, November.

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    More about this item

    Keywords

    Economic cost; Firm dynamics; Firm size; Regulations; Non-compliance;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • J8 - Labor and Demographic Economics - - Labor Standards

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