Employment and Trade in France

Transcription

1 Please cte ths paper as: Kramarz, F. (2011), Employment and Trade n France: A Frm-Level Vew ( ), OECD Trade Polcy Workng Papers, No. 124, OECD Publshng. OECD Trade Polcy Workng Papers No. 124 Employment and Trade n France A FIRM-LEVEL VIEW ( ) Francs Kramarz A product of the Internatonal Collaboratve Intatve on Trade and Employment (ICITE) JEL Classfcaton: F16

2 OECD TRADE POLICY WORKING PAPERS The OECD Trade Polcy Workng Paper seres s desgned to make avalable to a wde readershp selected studes by OECD staff or by outsde consultants. Ths paper has been developed as a contrbuton to the Internatonal Collaboratve Intatve on Trade and Employment (ICITE) coordnated by the OECD. The vews expressed are those of the author and do not necessarly reflect those of the OECD, OECD member country governments or partners of the ICITE ntatve. Ths document and any map ncluded heren are wthout prejudce to the status of or soveregnty over any terrtory, to the delmtaton of nternatonal fronters and boundares and to the name of any terrtory, cty or area. Ths document has been declassfed on the responsblty of the Workng Party of the Trade Commttee under the OECD reference number TAD/TC/WP(2011)19/FINAL. Comments on the seres are welcome and should be sent to tad.contact@oecd.org. OECD TRADE POLICY WORKING PAPERS are publshed on OECD 2011 Applcatons for permsson to reproduce or translate all or part of ths materal should be made to: OECD Publshng, rghts@oecd.org or by fax

3 Abstract EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) Francs Kramarz Drector, CREST, Professor, Ecole Polytechnque and ENSAE, and Consultant to the OECD Ths paper examnes, n France, the relatonshp between mports and trade more generally and employment. It bulds on the burgeonng lterature relatng trade and labour markets, takng nto account theores of frm-level trade and prevous emprcal work. The analyss n the paper draws on three data sources to establsh a matched frmlevel data set coverng trade, economc varables and employment for the tme perod from 1995 to The data set covers manufacturng frms. The paper develops estmates of the relatonshp between employment and trade actvty at the frm level, frst on an aggregate bass and then at ndustry level. Addtonal assessments are made wth respect to the frms experence wth changes n mports of fnshed goods and ntermedates. The concluson sums up the results and relates these to prevous work on the relatonshp of trade and employment n France, pontng to some possble explanatons and areas for further research. JEL classfcaton: F16 (Trade and labour market nteractons) Keywords: Trade, employment, wages, nclusve growth OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

4 Acknowledgements The OECD-led Internatonal Collaboratve Intatve on Trade and Employment (ICITE) has brought together ten nternatonal organsatons n an effort to deepen our understandng of the lnkages between trade and jobs and to develop polcy-relevant conclusons. ICITE s moblsng resources world-wde n an extensve programme of research, dalogue and communcatons. Partcpatng organsatons nclude: ADB, AfDB, ECLAC, IADB, ILO, OAS, OECD, UNCTAD, World Bank and WTO. The OECD s publshng ths seres of Trade Polcy Workng Papers drawng on the ICITE research programme. The ICITE project s beng mplemented under the auspces of a team at OECD. Douglas Lppoldt s the project manager and Secretary to ICITE. In relaton to the ICITE workng papers, Ana Jankowska and Monka Sztajerowska provded analytcal, edtoral and other substantve nputs, and Katjusha Boffa and Jacquelne Maher provded secretaral and admnstratve support. The OECD ICITE team s based n the Development Dvson, headed by Mchael Plummer, and under the drecton of Raed Safad, OECD Deputy Drector for Trade and Agrculture, and Ken Ash, OECD Drector for Trade and Agrculture. The OECD ICITE team gratefully acknowledges the qualty of the submssons receved from the workng paper authors. The papers have beneftted from comments and other support from ICITE partner organsatons (especally members of the ICITE Steerng Commttee), the Workng Party of the OECD Trade Commttee and other natonal experts, partcpants at the three ICITE regonal conferences held durng 2011 n Afrca, Asa and Latn Amerca, and other parts of the OECD (especally the Drectorate for Employment, Labour and Socal Affars). Ther contrbutons helped the authors and the OECD to further develop these papers and other aspects of the ICITE project. Ths paper has been developed as an nput to the ICITE project. The vews expressed are those of the author(s) and do not necessarly reflect those of the OECD, OECD member country governments or partners of the ICITE ntatve.

5 4 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) Table of contents Executve Summary Introducton Prevous fndngs for France Data descrpton Aggregate estmaton results Industry-level estmaton results Concluson Tables Table 1. Net job creaton rate Table 2. Net job creaton rate Table 3. Net job creaton rate (weght = average employment) Table 4. Net job creaton rate (alternatve weghtng scheme: weght = average scales) Table 5. Net job creaton rate (all observatons ncluded; weghts = average sales) Table 6. Net job creaton rate wth mports of goods and ntermedates (alternatve weghtng scheme; weght average sales) Table 7a. Net job creaton rate: Auto ndustry Table 7b. Net job creaton rate: Consumpton goods Table 7c. Net job creaton rate: Equpment goods Table 7d. Net creaton jobs rate: Intermedate goods Table 7e. Net Job Creaton Rate: Agro-Industres OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

6 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 5 Executve Summary Ths paper examnes the relatonshp between mports and trade more generally and employment n France. It bulds on the burgeonng lterature relatng trade and labour markets, takng nto account theores of frm-level trade and prevous emprcal work. The renewed nterest n the relatonshp between trade and labour markets s drven by the avalablty of new data as well as a better theoretcal understandng of frm-level trade. Prevous studes analysng the lnk between trade and employment n France were not conclusve, leavng room for further research on the causal relatonshp between the two as well as the underlyng factors responsble for partcular employment outcomes. For nstance, Bscourp and Kramarz (2007) examne the role of mports and exports on employment n the manufacturng sector n France and fnd a negatve assocaton between mports and employment. They dstngush between two types of mported goods: fnshed goods and ntermedate nputs an approach adopted n ths study as well. They fnd evdence that frms mportng fnshed goods always destroy more employment than frms only mportng ntermedate nputs, whch may reflect the mpact of outsourcng. Conversely, exports of fnshed goods have a postve employment effect and exports of other goods a negatve one. Kramarz (2010) complements Bscourp and Kramarz (2007) by examnng potental causes for these results. He attempts to verfy f foregn outsourcng, and n partcular offshorng, s a possble response to the hgh wages and strong unons n France. He also assesses the mpact of ncreased outsourcng on wages and employment. He s able to ths by computng compettors mportng behavour as well as employment changes and the strength of unons n frms. Hs estmates show that the group of frms facng stronger unons ndeed ncreased outsourcng and, smultaneously, reduced employment over the perod from 1986 to Meanwhle, frms facng weaker unons dd exactly the opposte. The present paper bulds on the fndngs of Bscourp and Kramarz (2007) and Kramarz (2010), extendng the prevous analyss n three mportant ways: 1) Due to changes n the composton of trade (n terms of products and country of destnaton and orgn), a more recent perod s covered ( ); 2) An ndustry dmenson s ntroduced on top of the aggregate analyss of the manufacturng sector, provdng addtonal nsghts nto ndustry heterogenety; 3) Fnally, gven that Bscourp and Kramarz (2007) s the only study that found a negatve assocaton between mports and employment, the analyss provded here gves further emprcal scrutny to ther results. In order to perform emprcal analyss, ths study uses data from three dfferent sources, merged together n a lengthy matchng process: 1) data on mports and exports obtaned from the French customs records; 2) data on frm-level economc varables derved from FICUS (fcher complet unfé de SUSE or the Unfed and Complete Fle from SUSE); and 3) the data on employment and wages derved from the so-called OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

7 6 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) DADS (Déclaraton Annuelle de Données Socales). The analyss s dvded nto three sub-perods: , and The analyss yelds unexpected results. One mght have expected that an ncrease n the number of mported products would be assocated wth substtuton effects (and thus, decreased employment) and that an ncrease n the number of exported products mght be assocated wth an expansonary effect (and thus, ncreased employment). The study, however, fnds contrary evdence. Namely, when the number of exported products ncreases, the effect on employment n France s clearly negatve for all perods. Interestngly, an opposte phenomenon appears to be assocated wth an ncrease n the number of products mported: more products mported are assocated wth an ncrease n employment. Across varous specfcatons and samples the man message remans robust: export ntensty s assocated wth employment losses. Moreover, the fndng that purchases of fnal goods, ncludng mports, put negatve pressure on employment, whle there s no such relaton between purchases of ntermedates and employment, s consstent wth the results n Bscourp and Kramarz (2007). The analyss of mports usng such a dvson nto goods and ntermedates yelds yet fner results, whch vary from perod to perod. The mpact of exports on employment growth s, however, negatve n each and every sub-perod. The ndustry-level analyss further confrms these fndngs. Frst, all of the manufacturng ndustres covered n the study tend to lose jobs. Second, n an overwhelmng number of cases, growth of exports s assocated wth employment losses (the only excepton s the automoble ndustry between 1995 and 1998). In addton, for most ndustres, but equpment goods, ncreased purchases of goods are assocated wth decreased employment. In the equpment goods ndustry a clearly postve employment mpact of ncreased purchases of goods mght reflect the nature of nvestment goods mported n ths case. Overall, there are some general patterns n our fndngs that appear to be stable. In most cases, the assocaton between export growth and employment creaton does not go necessarly n the expected drecton. Smlarly, mport growth has effects on employment that vary wth the perod and the ndustry. Fnally, the most stable factor affectng employment negatvely appears to be purchases of goods, ether from a French frm or from a foregn one. The estmates obtaned when dstngushng between mports of goods and mports of ntermedates are remnscent of those of Bscourp and Kramarz (2007). Interestngly, the papers that have tred to reproduce those results for other countres have not managed to fnd the same effect. Hence, the fndngs presented here for the recent perod together wth those for the perod from 1986 to 1992 n Bscourp and Kramarz (2007) seem to vndcate those by Kramarz (2010), for whom offshorng n France s a result of strong unons a French specfcty. OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

8 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 7 1. Introducton The lterature relatng trade and labour markets s burgeonng. Many reasons explan ths renewed nterest. Frst, theores of frm-level trade have become wdely avalable and accepted. Meltz (2003) s the leadng contender. Namely, hs study ntroduces frm heterogenety n a General Equlbrum framework and clearly enrches our understandng of frms tradng. Second, data are a factor. Frm-level measures of total exports were used n a seres of papers by Bernard and Jensen to document frm behavour. Recently, data and theory were brought together n a structural framework strongly confrmng the valdty of a modfed Meltz model (Eaton, Kortum and Kramarz, forthcomng). Because the frm was the unt of observaton, a set of papers started to look at labour market varables (essentally wages and employment) n conjuncton wth frmlevel trade actvty. These papers, mostly emprcal, have shown the potental postve mpact of exports on wages and employment, apparently because these exportng frms had better productvty than ther non-exportng equvalents. In addton, the recently avalable matched employer-employee data sources have allowed analysts to capture a more complete vew of the labour market by lookng at ndvdual wages wthn the trade envronment. These emprcal efforts have been recently vndcated by varous theoretcal frameworks desgned to capture the lessons of Meltz success n modellng frms exportng behavour whle smultaneously ntroducng the labour market, often wthn the Mortensen-Pssardes perspectve, as a way of modellng frctons. The most promnent example s Helpman, Itzhokh, Reddng (2010). Other proposals are on the table and one of them mxng Meltz wth the concept of barganng has been proposed by Eaton, Kortum, Kramarz and Sampognaro (2011). Work n ths area s ongong and any new fndngs wll, admttedly, be most welcome. Ths s what I propose here n ths emprcaldescrptve contrbuton. I wll frst summarze prevous fndngs from an earler study on a smlar queston, whch used a smlar type of approach for France for the perod from 1986 to Then, I wll descrbe the multple data sources that were used for the present paper. In the next secton, I wll present aggregate results, followed by estmates for dfferent manufacturng ndustres. Fnally, I wll brefly conclude outlnng possble explanatons for our potentally surprsng fndngs. 2. Prevous fndngs for France Followng Bernard and Jensen (1997), Bscourp and Kramarz (2007) adopt a very descrptve perspectve n order to examne the role of mports and exports on employment. Ther emprcal analyss comprses three stages. Frst, they study the relaton between trade and job creaton and job destructon n the manufacturng sector usng a quas-exhaustve panel of frms. Ths fle ncludes, n partcular, very small frms. Then, they examne the relaton between trade and skll structure, usng measures of the share of producton jobs n total employment of manufacturng frms and of the fracton of unsklled workers wthn these producton jobs. Unfortunately, the sze of the sample s reduced because the Survey on Skll Structure ncludes only establshments wth at least 20 employees. Followng the lterature they apporton the total job changes to betweenndustry effects, wthn-ndustry but between-frm effects, and wthn-frms effects of skll changes. Fnally, they examne the robustness of ther results by ntroducng frmlevel measures of nnovaton, whch control for changes n the technology envronment. OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

9 8 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) At each stage, they relate changes n employment or skll structure, both measured at the frm-level between 1986 and 1992, to changes n trade actvty, also measured at the frm-level and over the same perod. When they use ther exhaustve manufacturng data set, they also compare the contrbutons of frms that are present at both ends of the sample perod wth those that de or are born durng the perod. Agan, because ther data allow them to dentfy the categores of mported goods (usng a 3-dgt classfcaton), they dstngush between two types of mported goods at each stage of ther analyss (followng Feenstra and Hanson, 1995 and 1996). When the classfcaton of the mported good exactly concdes wth that of the mportng frm, they label the mported good as fnshed. Otherwse, they label the mported good ntermedate nput. Ths concept of fnshed goods tres to capture outsourcng strateges n whch the producton process s segmented and ncorporates fnshed nputs from abroad (Fontagné, Freudenberg, and Unal-Kesenc, 1995; Venables, 1999). These authors fnd evdence that frms mportng fnshed goods (FG) always destroy more employment than frms only mportng ntermedary nputs (II), condtonal on changes n local purchases. The former type of mports may reflect outsourcng strateges. Imports from low-wage countres have a slghtly more negatve assocaton than average mports, but the dfference s mnor. Exports of fnshed goods,.e. of goods normally produced by the frm, are postvely assocated wth employment changes, but exports of other goods have a robust negatve effect, potentally reflectng FDI. Turnng to sklls, they fnd the usual result,.e. that most changes occur wthn frms, a fact often nterpreted as evdence of skll-based techncal change. Usng a regresson framework, Bscourp and Kramarz (2007) fnd that FG mports have a negatve assocaton wth producton labour, as well as unsklled labour (at least n the largest frms). Controllng for nnovaton takng place at the frm level does not alter any of ther conclusons. Kramarz (2010) complements Bscourp and Kramarz (2007) n hs study of potental causes for these results. The paper notes that mports from developng countres to the Unted States or Western Europe were not huge at the end of the 1980s. However, the Sngle Market Program (SMP, hereafter), an attempt to establsh the European Communty s (EC, hereafter) nternal market, was conceved n 1985 and launched n 1988, wth the hope of beng fully mplemented around Ths entaled decreased tarffs and barrers wthn the EC. Hence, mports from the EC ncreased at a very rapd pace n France durng the second half of the 1980s. 1 In ths context, the mere exstence of 1. French Natonal accounts show that mports ncreased at a very fast rate over the years 1986 to 1992: above 6% per year n the frst fve years wth a decrease n the pace of expanson to 3% n 1991 and 2% n the fnal year. In fact, whereas mport growth was at best mld between 1981 and 1985, our sample perod appears to be the begnnng of a perod of rapd growth for French mports that contnued most of the ensung years. (accessed 5 Aprl 2005). In addton, Bscourp and Kramarz (2007) show that mports from low-wage countres were - and remaned a mnor, albet ncreasng, component of mports of goods over the analyss perod. However, when measurng mports of manufacturng goods as a fracton of GDP, the rato was 14% n 1986 (as well as n the precedng years to 1985). It ncreased to 17% n and 16% n ( _95.xls and t_1105_95.xls (accessed 26 February 2008). OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

10 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 9 new sourcng optons was a sgnal that foregn outsourcng was a potental threat, n partcular for ndustres or frms n whch hgh wages were due to the presence of strong unons and the absence of product market competton. At the same tme, and for the same reasons, because European frms could export to France more easly, French frms faced ncreased market pressures, not from Bejng but from other European countres. Smlarly, n the Unted States, unon plants and frms started to lose employment n the 1980s. Many such plants were located n the North and new plants started to open n the non-unon South. Foregn-owned car plants started openng n the second half of the 1980s, n partcular around Interstate Ths move to the South also took place n other ndustres (see the example of RCA n ts varous guses descrbed n Cowe, 1999). Of course, n the case of the Unted States, mports may not be the rght word and the evdence that unons caused job losses and the assocated outsourcng, be t local or foregn, s mssng. But, France s a small country when compared wth the Unted States; what s local outsourcng n the Unted States may be foregn n the analogous stuaton n France (to the East though, rather than to the South, at least durng the analyss perod). The two questons that Kramarz (2010) examnes derve from a prevous paper: 1) In a context of ncreased compettve pressures and expanded opportuntes due to the SMP, was foregn outsourcng, n partcular the foregn outsourcng of fnal goods (offshorng, hereafter), a possble response to the hgh wages and strong unons, n partcular n those years that followed the electon of the French socalst government?; 2) And, ndeed, what was the mpact of ncreased outsourcng on wages and employment? 3 Even though macro-economsts have examned these questons both theoretcally and emprcally, at the country- or the ndustry-level, there s vrtually no mcro-econometrc analyss, no emprcal examnaton of the precse mechansms at work usng mcrodata sources. Kramarz (2010) looks at the effects that can be dentfed n the French context usng dfferences across and wthn frms, rather than across ndustres. More precsely, because he has access to admnstratve data on the nature and amount of mports and exports measured at frm-level n France (fnal goods versus ntermedates), he observes all frms that outsource ntermedates or fnal goods, and he can compute the frms compettors mportng behavour. Moreover, thanks to access to admnstratve data on balance-sheets and employment, he can compute the frms' value-added or employment. Also, by vrtue of havng access to a survey on unon behavour, he can compute the strength of unons n most frms. Fnally, because he uses admnstratve longtudnal matched employer-employee data on wages, he can measure the changes n ndvdual, not aggregate, wages. A clear answer to Kramarz (2010) s questons would contrbute to at least two strands of the lterature. Frst, t would nform the wage nequalty debate. 4 Second, because 2. See for nstance or among many other press reports. 3. In ths text, I wll equate outsourcng wth outsourcng from foregn orgn. 4. On one sde, Lawrence (1994), Lawrence and Slaughter (1993), Krugman (1995) have argued that recent changes cannot be accounted for by ncreased trade wth low-wage countres. On the other, Wood (1995) has accused trade of beng responsble for the deterorated poston of unsklled workers whle Leamer (1994) and (1996), and Freeman (1995) appear to stand n the mddle. Unfortunately, evdence s not compellng and mostly reles on mport penetraton measured at the OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

11 10 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) product market competton s a potental underlyng mechansm affectng the labour market, an answer would also contrbute to the lterature that examnes the relatonshp between wages, barganng nsttutons, and profts. 5 To understand the dentfcaton strategy that Kramarz (2010) pursues, the followng thought experment s helpful. French manufacturng was relatvely protected from nternatonal competton at the begnnng of the 1980s. In addton, a relatvely large fracton of frms were state-owned (as compared to other smlar Western European countres), n partcular after the electon of Presdent Franços Mtterrand. Ths lack of competton nduced the creaton of rents (a result documented n Abowd, Kramarz, Lengermann, and Roux, 2007). Because of these rents as well as the barganng nsttutons, many French frms barganed wth ther workers, but not all. These barganng regmes vared from frm to frm. Some unons were n better poston to seze the potental rents. However, all frms were ht by exogenous foregn competton shocks. In partcular, all French frms were affected by the ntroducton of SMP at the end of the 1980s, facng ncreased foregn competton and ncreased opportuntes for outsourcng. Bscourp and Kramarz (2007), based on the same data on trade (mports as well as exports) and on frms, also coverng the same tme perod that I use n the present paper, have shown that mport growth (of fnal goods) was strongly assocated wth employment losses. They show an assocaton, but no causal relatonshp. The ncreased mports from compettors' or ncreased outsourcng had, nevertheless, the potental to affect the barganng process because they were lkely to change a frm's ablty to pay the workers the sze of the quas-rent as well as the frm's and the workers' threat ponts. What happened to wages and employment n these dfferent frms and under these dfferent barganng regmes? How dd unons react? If Kramarz (2010) s able to show, both theoretcally and emprcally, that strong unons caused offshorng, whch n turn caused employment and wage losses, he has found a causal mechansm for Bscourp and Kramarz's result. Wth these thought experments n the back of our mnds, let us now present the structure of Kramarz s paper. To capture the nfluence of outsourcng threats on barganng, Kramarz starts by presentng a smple model, partcularly well-suted to the French nsttutonal setup studed here. It wll help us capture the mechansms through whch a frm's outsourcng of fnal goods can drectly affect wages and employment. In partcular, the model shows that, wth mperfect competton n the product market, frms facng strong unons are lkely to use offshorng more ntensvely than frms facng weaker unons. Ths s because ncreased offshorng reduces the sze of the rent that the unon and the frm bargan over. Indeed, offshorng acts as a threat pont n the barganng process and dscplnes workers. 6 Furthermore, n ths context, employment decreases aggregate or at the sectoral level (see for nstance Revenga, 1992, see however Bernard and Jensen, 1997 or the book edted by Robert Feenstra, 2000). 5. Abowd and Lemeux (1993) examne the relaton between product market competton and wages n a barganng framework whereas Blanchflower, Oswald and Sanfey (1996) look at the more general relaton between profts and wages. Goldberg and Tracy (2001) as well as Bertrand (2004) focus on recent changes nduced by ncreased mport competton and movements n exchange rates. Unfortunately, these last authors used ndustry-level measures of mports because of the lack of frm-level data. 6. A threat pont, also known as the dsagreement pont v n a game-theoretcal context of barganng, s the value the players can expect to receve f negotatons break down and no bargan can be reached. OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

12 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 11 when offshorng ncreases. But, wages do not necessarly decrease (as they are the outcome of the barganng process, albet wth altered payoff scenaros). Kramarz s (2010) emprcal analyss starts by showng how foregn outsourcng and, more generally, trade competton are related to the sze of the rents at the end of the 1980s n French manufacturng. In partcular, usng a sze-of-the-frm dscontnuty present wthn French nsttutons, he shows that barganng nsttutons are lkely to cause the observed structure of ths relatonshp. Because barganng nsttutons matter and, n partcular, unons' strength, he dentfes whch frms face strong unons,.e. unons wth a strong barganng power, and whch frms face weaker unons. To do ths, he estmates a structural wage equaton that drectly dentfes unons' barganng power. Hs use of matched employer-employee data sources allows hm to drectly measure the varous components of ths structural equaton. Kramarz s (2010) estmates demonstrate that there are essentally two types of frms, dependng on ther barganng regme: 1) frms facng strong unons n whch workers capture half of the rents and 2) frms facng weaker unons where workers are pad ther opportunty wage. Moreover, he hghlghts that workers are negatvely affected by mport competton. Fnally, the paper shows that the frst group of frms (.e. wth strong unons) ndeed ncreased outsourcng and, smultaneously, reduced employment over the perod, as predcted by the model, whereas the second group (.e. frms wth weaker unons) dd exactly the opposte. There are several addtonal elements, absent from the above papers, whch deserve attenton. Frst, the tme perod covered by the studes s from 1986 to There s a good reason for ths: after 1992, customs data do not capture the full extent of trade snce all movements wthn the European Unon that are below a gven threshold are not reported anymore. However, the composton of trade (n terms of products and country of destnaton or orgn) has obvously changed. Second, the analyss was performed for manufactures n the aggregate. Some ndustry dmenson would certanly be useful. Thrd, the results found n the above paper (Bscourp and Kramarz, 2007) show a negatve assocaton between employment and mports. It s the only paper havng found such results (a Dansh paper fnds a postve correlaton for small and medum sze frms and a negatve relaton for larger frms). A natural queston then ensues: Why? And who s rght? For nstance, the role of unons n the frms decson to offshore has not been extensvely studed. Can we fnd smlar results to the ones above when examnng the perod from 1995 to (for whch smlar data are avalable)? Some of these questons are addressed n the followng analyss. OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

13 12 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 3. Data descrpton Ths paper uses data from varous sources. Frst, I wll descrbe the data on mports and exports (Customs). Then, I wll explan the data on frm-level economc varables (FICUS). Also, I wll present a thrd source, the so-called DADS, wth data on employment (and potentally wages), comng from LEED (Longtudnal Employer- Employee Data). Fnally, I wll descrbe the lengthy control and matchng process of these three data sets. The customs data set Up to 1992 all shpments of goods enterng or leavng France were declared to French customs ether by ther owners or by authorzed customs commssoners. Startng n 1993, only shpments above a certan level (essentally 1 mllon French Francs) for and from countres wthn Europe were declared (dfferent denomnatons and composton had to be declared dependng on the year). However, frms often declared amounts below the threshold. Hence, I keep every declaraton. These declaratons consttute the bass of all French trade statstcs. Each shpment generates a record. Each record contans the frm dentfer, the SIREN a unque number that dentfed each frm n France, the country of orgn (for mports) or destnaton (for exports), a product dentfer (a 6-dgt classfcaton), and a date. All records are aggregated frst at the monthly level. In the data fles accessble to researchers, these records are further aggregated by year and by 3-dgt product (NAP 100 classfcaton, the equvalent of the 3-dgt SIC code) untl 1992 and, for the perod from 1995 to 2004 that I study, I kept a more dsaggregated (4-dgt) product classfcaton. Therefore, each observaton s dentfed by a SIREN, a product code, a country code, an mport or export code, and a year. In the followng analyss, I restrct attenton to all frms n the manufacturng sector n years 1995, 1998, 2001, and n year Hence, I aggregate across manufacturng products exported or mported. I can, thus, measure each frm's amount of total exports and mports n the four sample years that I examne by country of destnaton or orgn. Transactons are recorded n French Francs and reflect the amount receved by the frm (.e. ncludng dscounts, rebates, etc.). Because I also use data produced after 2002, all amounts have been translated nto Euros n order to allow comparsons. For nstance, the data n 2001 has observatons. Aggregated by frm, there are observatons for mports and 120,793 for exports. To obtan more detaled nformaton about the type of product mported, I follow Bscourp and Kramarz n defnng two types: ntermedates and fnshed goods. Whenever the product classfcaton of the mported product s wthn the same classfcaton as that defnng the man actvty of the frm (at the 4-dgt level), the mported product s labelled fnshed good ; otherwse t s labelled ntermedate. Roughly, two-thrds of the mported products are ntermedates. The FICUS data set The FICUS data base provdes frm-level nformaton. FICUS s the outcome of the SUSE system, (SUSE stands for Système Unfé de Statstque d'entreprses or Unfed System of Frm-level Statstcs). Its goal s to establsh a consstent set of frm-level varables and statstcs by the jont use of two base sources. The frst one s fscal n ts orgn and groups the bénéfces ndustrels et commercaux (BIC) and the bénéfces non commercaux (BNC), two fscal regmes that cover essentally all French frms. The other one, the annual survey of frms (EAE. enquête annuelle d'entreprses) s statstcal n OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

14 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 13 nature and s the outcome of a complex procedure n whch both the Mnstry of Industry and the ndustry branches, as represented by the busness unons, take part. It allows the analyst to study the productve system from varous angles: producton, nputs, revenue and expense accounts, balance-sheet and economc performance of frms. To facltate the explotaton of ths complex and rch source, a unque fle has been created, the so-called FICUS (fcher complet unfé de SUSE, the unfed and complete fle from SUSE) mentoned earler. Ths fle essentally covers all frms and all fscal regmes, wth the excepton of the mcro-bic (very small frms wth sales below EUR n 2011, EUR for servce frms), agrcultural frms (Bénéfce Agrcole) and farms under the BIC regme. It also contans all ndustres except for agrculture, both for metropoltan France and the overseas departments. Furthermore, t ncludes a broad but lmted number of economc and accountng varables (smplfed balance sheet and smplfed revenue and expense accounts). For nstance, t contans total sales, total labour costs, valueadded, total employment, total purchases and profts. Focusng on three sub-perods of low nflaton, , , and , I use these varables measured n nomnal terms. In 2001, the number of observatons n the ntal FICUS fle s The DADS data set The DADS (Déclaraton Annuelle de Données Socales) comprses all records of wages of all employees, as declared by employers to the tax authorty. It s then compled nto an exhaustve data set organzed by pars of years, by establshment and number of workers wthn a gven establshment. Hence, the year t fle comprses all employees wthn a gven establshment for year t-1 and year t. When a worker s present n both years n the establshment, there s a sngle lne. When he/she s present n t-1, all year t varables are mssng, and conversely for year t. Vewed from a worker perspectve, there s a unque person dentfer and, hence, t s possble to a have a comprehensve vew of each worker s employers and wages. The total wages gven to any person are then compared by the tax authorty to the ncome declaraton that each household has to fle every year. Startng from 2009, the declared wages are automatcally nserted onto the ncome declaraton form by the tax authorty, whch s therefore pre-flled. Each ndvdual record ncludes the start date and the end date of the spell, the number of hours, and the gross and the net earnngs that accrued to the worker durng the spell for each of the two years t-1 and t. It also ncludes the skll level (3- or more often 2-dgts classfcaton), sex and natonalty of the worker. From ths fle, I performed an aggregaton at dfferent levels. Frst, the data are aggregated by establshment and year, for year t gong from 1996 to It allows me to compute varous measures of employment, weghted or not by hours and days of work wthn each year. Second, the data are examned at the ndvdual-, establshment-, and year-level as follows. Establshments can be destroyed and created wth no change n economc actvty when, n partcular, they move from one locaton n a localty to another locaton wthn the same localty. Hence, there s potentally too much employment creaton and destructon. To control for ths process, I do the followng. I take all those workers wthn an establshment who move to another establshment ether of the same frm or from a dfferent frm wthn the same localty. If the fracton of such workers s large enough wth respect to the establshment employment, then the new establshment s further examned. Frst, t s checked that t was not n exstence prevously. Smlarly, t s checked that the old establshment does not exst afterwards. Then, f they both belong to the same frm, the new establshment s connected to the old one and t s treated as f there were no establshment creaton or destructon. If these OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

15 14 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) establshments do not belong to the same frm, then I checked whether t s a partcular establshment wthn the two frms that receved a transfer of most workers. If not, then f all establshments of the orgn frm have most workers transferred to the same number of establshments of the destnaton frm, and then t s consdered that there s no establshment creaton or destructon. Usng ths procedure, I compute employment (weghted by days) for each year between 1995 and 2004 at the establshment level. It s then aggregated at the frm level, usng all avalable establshments, once checked for ther true brth or death as descrbed just above. In 2001, there are establshments from all ndustres for whch we try to measure employment. Matchng of the three fles Frst, I match FICUS wth the DADS fle at the establshment level. In 2001, the resultng data set has observatons. Then, the equvalent fle for 2004 ( observatons) s matched wth that of Then, ths matched fle ( observatons) s restrcted to the manufacturng frms (excludng extractve ndustres) wth postve sales ether n 2001 or n The fle has now observatons (establshments). However, some frms may well be absent from the DADS when they have no salared employees and stll be n FICUS (wth zero employees n both 2001 and 2004). These frms are also kept, resultng n a data set wth observatons (agan establshments). These establshments are then aggregated at the frm level, resultng n unque frms present n 2001, 2004 or both. These observatons are now matched wth the customs data fle to enter the trade actvty. Snce most frms do not trade (mport or export) n any of these years, we keep all frms from the prevous match. For the perod , the number of frms s and for the perod , the number of frms s These fles contan all relevant varables. However, measurement errors n the varables of nterest may well have slghtly decreased the sze of some of our analyss fles. We wll see n what follows that the measurement error s ndeed a serous ssue wth no easy escape-strategy. 4. Aggregate estmaton results In ths secton, I present estmates of equatons that relate employment and trade actvty at the frm-level for French manufacturng frms. These equatons are descrptve and should be seen as descrptve wth lttle causal nterpretaton offered. They must be consdered as the frst stage of a more ambtous program, ncludng the search for potental nstruments or, more probably, the estmaton of a structural model for exportng/mportng frms wth ther assocated consequences on employment. Let me frst descrbe the estmated relatons. I compute the rate of growth as follows (n the sprt of Davs and Haltwanger, 1999). Frst, there are three sample perods: , , and Then, I defne employment of frm at the begnnng and at the end of each sample perod as perod s defned as frm over the perod: L B E L B and L E. Average employment over the L L and I use t to compute employment growth n the 2 OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

16 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 15 L L E L To descrbe these data further, I apply a smple regresson analyss to the set of all (contnung, dead or newly born) frms. Agan, I do not attach any causal nterpretaton to my specfcaton or results. More precsely, for each of my three sample perods, I estmate the followng smple frst-dfference regresson: L Tr Z where L s the employment growth rate for frm durng the sample perod (defned as before), Tr s a vector of measures of trade growth at frm (descrbed just below), s a vector of measures of economc shocks potentally affectng frm (also Z descrbed just below), and s an..d. (ndependent and dentcally dstrbuted) shock. My vector of measures of nternatonalzaton ncludes the change n mports (or exports) between the begnnng and the end of the perod as a fracton of sales. To control for shocks that mght have affected the frm, Z ncludes the growth rate of frm s total sales (computed à la Davs and Haltwanger), the change n the rato of frm s goods purchases to total sales, and the change n the rato of frm s ntermedates purchases to total sales. The regresson s weghted ether by average employment L or by average sales. Varous robustness checks are estmated and presented. The frst and smplest specfcaton, n whch L B Z (1) only ncludes total sales growth rate, s presented n Table 1. Furthermore, the set of observatons s restrcted to those for whch the dscrepancy between employment change between the begnnng and the end of the sample perod as measured wth FICUS and as measured wth the DADS s small. Here, small means n absolute value. There are many potental reasons for such dfferences. They have to be explored further. The set of such frms s qute small (look at the number of observatons at the bottom of Table 1 and at the bottom of Table 5). There are less than a hundred frms n each sample perod, but these frms are potentally large at ether the begnnng or the end of each sample perod. Hence, ther ncluson mght affect the estmated results. Ths s somethng I wll check later n the text. Table 1. Net job creaton rate Intercept Change n export ntensty Change n mport ntensty Growth of sales R-Square Number of observatons Note: In ths table and subsequent tables the frst column under each tme perod represents coeffcents and the second represents standard errors. The estmates of Table 1 show that employment essentally decreased n manufacturng n each perod (even though the varables are not cantered, ther means are very close to zero). They also show that sales go hand n hand wth employment changes. Fnally, focusng on our man varables of nterest, changes n export ntensty (measured OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

17 16 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) as a rato of the change n the level of exports to average sales over the sample perod) has a depressng effect on employment, whereas the effect of changes n mport ntensty appear to be small, but there s large varaton. Agan, there s no causal meanng that can easly be attached to such results. For nstance, frms mght have decreased employment and, therefore, reduced ther costs n order to ncrease ther exportng capacty. However, controllng for changes n sales reduces the potental for such an nterpretaton. Table 2 s smlar n sprt to Table 1. Some frm varables are added to the regresson as control varables. Before dscussng them, t must be noted that none of the prevous conclusons s altered. The varables that were added to the ntal ones are measures of changes n the reach of the frm. Because customs data allow me to know the destnatons and orgns of the exports and mports, respectvely, I can compute the changes n ths number of destnatons and orgns. Because customs data allow me to know the products mported or exported, I can compute changes n quanttes, wth the underlyng dea that an ncrease n the number of mported products mght be assocated wth substtuton effects, whereas an ncrease n the number of exported products mght be assocated wth an expansonary strategy. In fact, ths presumpton appears to be turned on ts head. When the number of exported products ncreases, the effect on employment n France s clearly negatve for all perods. Interestngly, the opposte phenomenon appears to be assocated wth an ncrease n the number of products mported: more products mported are assocated wth an ncrease n employment. As for the number of countres, ncreasng the number of destnatons s good for employment and ncreasng the number of sourcng countres s good n two sub-perods. Table 2. Net job creaton rate Intercept Change n export ntensty Change n mport ntensty Growth of sales Change n number of countres of mports Change n number of mported products Change n number of countres of exports Change n number of exported products Number of closed establshments Change n number of establshments Number of permanent establshments Change n number of zones d'emplo R-Square Number of observatons Note: Zone d emplo refers to geographc areas that consttute local labour markets Usng data from the DADS, t s possble to compute the number of new, ongong, and closed establshments over each sample perod. By usng the locaton of these establshments, t s also possble to measure the change n geographc dsperson of the frm wthn France. Results from Table 2 show that a larger number of permanent (ongong) establshments s always assocated wth employment losses. Smlarly, an ncrease n geographc dsperson across French establshments s assocated wth an ncrease n employment. However, the effects of new openngs and closures appear more complex. Frst, the addton of a new establshment has a negatve mpact n two of the three sub-perods. Second, the mpact of the closure of an establshment has to be computed from the sum of the closed establshments effect and the sum of changes n OECD TRADE POLICY WORKING PAPER N 124 OECD 2011

18 EMPLOYMENT AND TRADE IN FRANCE: A FIRM-LEVEL VIEW ( ) 17 the number of establshments (applyng a value of mnus one). Hence, the effect of the closure of one establshment s postve n , negatve n , and essentally zero n (notce that 2001 s the startng date of a clear decrease n manufacturng employment, as measured n aggregate statstcs). The underlyng mpact of globalsaton on establshments operatons s clearly hard to capture from these smple regressons. The next regressons test the robustness of those that I have just presented usng varous strateges. Frst, I add two varables n the base equaton to control for purchases of the frm: the change n purchases of ntermedates and the change n purchases of goods (both as a rato of total sales). Results are presented n Table 3. They clearly show elements of consstency wth the results from Bscourp and Kramarz (2007): goods play a role that appears to wdely dffer from that played by ntermedates. Purchases of goods, ncludng mports, destroy employment, whereas there s no such relaton between employment and purchases of ntermedates. 7 Table 4 presents results of regressons that use the same varables as n Table 3 but wth a dfferent weghtng scheme. Rather than usng average employment n the perod, I use average sales n the perod. Results are very smlar to those presented above. The coeffcents on export- and mport ntensty are of the same sgn. Ths s also true for the coeffcents for the change n the purchases of goods (stll negatve). Table 5 uses agan the same varables and the same weghtng scheme, but ncludes all observatons; n partcular those for whch estmates of changes n employment computed usng the DADS and usng FICUS were very dfferent. The man message s that export ntensty s assocated wth employment losses, smlarly to changes n the purchases of goods. These ponts seem very robust across specfcatons and samples. Table 6 adds a further twst to the prevous specfcaton by dstngushng mports usng the two product types, as defned above: mports of fnshed goods on one sde (when the mported product s of the same ndustry as that of the frm) and mports of ntermedates for all other products (see also Bscourp and Kramarz, 2010). In readng the table, t s mportant to note that t reflects the separate, smultaneous ncluson of purchases (ncludng mports) of goods and ntermedates. Notce frst that most coeffcents n Table 6 are qute smlar to those n Table 5. However, those that change sgn and magntude are those of purchases and mports of ntermedates. Results are not stable from perod to perod. For the frst sub-perod, all purchases of goods, be they mports or local, have a smlar negatve effect on employment. Purchases of ntermedates from France have a negatve mpact whle purchases of ntermedates from outsde France (the sum of the two coeffcents) have an essentally zero effect. For the sub-perod, sgns swap and magntudes are altered. The mports of goods have a greater, more negatve, mpact on employment than local purchases of goods. As for ntermedates, local purchases have a mldly postve mpact on employment whle foregn purchases have a qute negatve mpact. Fnally, for the later sub-perod, local purchases of goods and ntermedates have a negatve mpact on employment growth, whereas foregn purchases (mports) of goods and ntermedates have a clearly postve mpact on employment. Fnally, the mpact of exports on employment growth s agan negatve n each and every sub-perod. 7 Unfortunately, at ths stage, I dd not have enough tme to code the mports nto ntermedates and goods as I dd wth Bscourp for the perod. But the constructon of such varables s clearly hgh on my agenda. OECD TRADE POLICY WORKING PAPER N 124 OECD 2011