The Effects of Reduced Social Security Contributions on Employment: An Evaluation of the 2003 French Reform

Authors


  • Submitted January 2010.

  • This study has been funded by the French Ministry of Labour (CEE-DARES Agreement No. 1686). The authors would like to thank Julien Deroyon, Paul Franceschi, Dominique Goux, Alain Gubian, Cyrille Hagneré, Nadia Halibey, Stéphanie Jamet, Nadia Joubert, Etienne Lehmann, Cyril Nouveau, Benoît Ourliac, Elena Scantanelli and Henri Sterdyniak for their helpful comments, as well as those who attended the Journées Louis-André Gérard-Varet (2008), Journées de Microéconomie Appliquée (JMA; 2008), Association Française de Science Economique (AFSE; 2008), European Association of Labour Economists (EALE; 2008) and Theory and Methods of Macroeconomics (T2M; 2010) conferences, where the previous version of this paper was presented. In addition, they would like to thank the two anonymous referees for their useful comments. As usual, the authors remain responsible for any mistakes and inaccuracies presented in this paper.

Abstract

In 2003, the French government decided to reform the system managing the different minimum wage regulations and the targeted reductions to employers' social security contributions. The main objective of the Fillon reform was to simplify the complex regulations that were created by the progressive introduction of the 35-hour week. The reform incidentally created large variations in labour costs, depending on the type of firm and the wage level within the firm. This paper presents an evaluation of the impact of this reform on employment using a balanced panel of firms with more than five employees, drawn from a matching between several administrative data sources from 2000 to 2005.

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