Trésor-Info - Publications de la direction générale du Trésor - working-papers

Barriers to Migration in the European Union: Does Joining the Union Lead to Lower Barriers?

2024-02-27T00:00:00+01:00

The Working Papers series presents work carried out within DG Treasury, distributed with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work.

This working paper looks at the effect of joining the European Union on openness to migrants, both European and non-European. It replicates and extends Head & Mayer's (2021) gravity model-based analyses of barriers to migration within European countries. Using an event analysis, we show in addition that EU membership is responsible for a reduction in barriers to migration, of over 25% compared to their level 5 years prior to EU entry, for EU migrants.

Are low-income households sensitive to tax incentives for energy efficiency investments?

2023-02-13T00:00:00+01:00

The Working Paper series presents work carried out within DG Treasury, disseminated with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work

This paper assesses the impact of the increase in tax credit rate implemented in France on September 1, 2014 on low-income households’ renovation investments. The transition from the CIDD to the CITE increased the tax credit rate by 5 to 30 percentage points (ppt), depending on households’ income and on the type and number of eligible renovations undertaken (i.e., a single renovation item or a combination of items from a schedule). In particular, this study focuses on the effect of the 15 ppt increase (from 15 to 30%) in the tax credit rate on low-income households’ decision to renovate, on the one hand, and on the amounts they invested, on the other hand. Using a Regression Discontinuity Design model, the 15 ppt tax credit rate increase for low-income households was found to have a statistically significant and positive effect on the probability to renovate, which increases by 1.3 ppt (from an average renovation rate of 1.4% before the reform). We also investigate the potential heterogeneity in the treatment effect on this probability. We find that owners of single household dwelling units, larger dwellings and older dwellings are more sensitive to the tax credit rate increase. The impact of the reform also increases with income (among low-income households). Results on the intensive margin (i.e the additional amount spent by households on energy efficiency investments) show that the reform increases the level of investment by 26% (+€970). However, this result depends on the selected treatment group: when we restrict the sample to households undertaking only one renovation item (before and after the reform – as opposed to a combination of two or more after), the effect on the amount of renovation expenditures is no longer statistically significant, while the effect on the decision to renovate remains significant.

Overall, we show that the increase in tax credit rate for renovation investments in 2015 increased the probability for low-income households to undertake renovation work for two or more eligible items, thus increasing their average total amount of investment, but did not encourage them to carry out more costly single-item renovations.

European Union's Emissions Trading System and Productivity: Firm-Level Evidence for France, Italy and Spain

2022-09-21T00:00:00+02:00

The Working Paper series presents work carried out within DG Treasury, disseminated with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work.

The European Union Emissions Trading System (EU ETS) was introduced in 2005 in order to incentivize a reduction in carbon emissions in industrial firms in the most efficient way. Despite a low carbon price during the initial phases of the scheme, the EU ETS did foster a reduction in industrial emissions. A key question, though, is whether these reductions came together with lower productivity, as the scheme has constrained production processes. We study the effect of the EU ETS on total factor productivity (TFP) for manufacturing firms in France, Italy and Spain, from 2000 to 2017. The EU ETS is here considered as a quasi-natural experiment and we apply a difference-in-difference framework. We study whether firms reacted differently depending on their initial efficiency, size, financial constraints, sector, and country; or across the different phases of the implementation. The results suggest that the instrument overall was not detrimental to firms' productivity, except for smaller firms, firms initially far from the technological frontier, and financially-constrained ones. The reform had a positive impact on TFP for larger firms and more efficient or less financially-constrained ones. The impact of the EU ETS is found to be very heterogeneous across sectors, the major beneficiaries being the food, chemicals and metallurgy industries. It is also more positive in France than in Italy and Spain.

Analysis of The Vulnerability of French Imports

2021-12-15T00:00:00+01:00

The Working Paper series presents work carried out within DG Treasury, disseminated with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work.

This working paper introduces a new methodology for assessing the vulnerability of French supplies at the most detailed level of products, and applies it to metal products, that are critical inputs for industries. It builds on previous statistical work on the identification of vulnerable imported products carried out by the French Treasury (Tresor-Economics No. 274). The identification of vulnerable metal products is based on a combination of three criteria: (i) a large share of French imports from outside the EU, (ii) a concentration of imports from a limited number of supplier countries outside the EU and (iii) insufficient production at the EU level. This study is one of the first to use the characteristics of firms importing vulnerable products in order to (i) measure the exposure of the different sectors to these products and (ii) characterize the resilience of firms to a shortage of these vulnerable products according to criteria such as the storage behaviour of these firms.

Which industrial firms make decarbonization investments?

2021-08-17T00:00:00+02:00

The Working Paper series presents work carried out within DG Treasury, disseminated with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work.

This working paper seeks to understand the drivers of decarbonization investments by industrial firms in France. I investigate the extent to which firms' characteristics determine the probability of engaging in green investments and the size of these investments. By mobilizing a selection model on individual panel data estimated between 2013 and 2018, I show that the adoption of decarbonization technologies increases with firm size, energy intensity, productivity, and inclusion in the ETS, and decreases with firm age. Among firms investing in decarbonization, the size of the decarbonization investments is determined by firms’ energy intensity. The analysis suggests that some highly-emitting sectors have tended to invest less in decarbonization than other sectors, providing emerging evidence that decarbonization investments should be accelerated as a priority in these sectors.

Live and (don't) let die: The impact of Covid-19 and public support on French firms

2021-04-20T00:00:00+02:00

The Working Paper series presents work carried out within DG Treasury, disseminated with the aim of enlightening and stimulating public debate. The authors are solely responsible for their work.

The Covid crisis has had a massive impact on the economy, especially on firms. The French Treasury has developed a microsimulation tool which allows to estimate the impact of the crisis, and of public measures taken in response to it, on financial health at the firm level. This tool is based on an accounting model similar to the one used in several publications, however it also integrates observed data at the firm level on the magnitude of the shock on firms and their use of the public support. In particular, it makes use of observed data on the evolution of the turnover, employment and payroll of firms, as well as their use of the short-time work scheme, the solidarity fund for SMEs and payroll taxes deferrals. Such a tool allows to simulate the evolution of illiquidity, insolvency and indebtedness at the firm level, taking into account the heterogeneity among firms. Results show that the financial health of firms has deteriorated in 2020 compared to a year without crisis, but public support – mostly the short-time work scheme and, for small firms, the solidarity fund – has considerably limited the increase in the number of illiquid or insolvent firms. Moreover, the impact of the crisis varies across industries and insolvency affects productive firms more than it does in normal times. Finally, the increase of firms’ debt in 2020 may impair investment during the recovery. Relying on a dynamic model of corporate investment under financial constraint, we estimate that the debt overhang caused by the crisis could reduce corporate investment by almost 2% during the recovery phase. However, a similar model shows that R&D spending could be more resilient to the deterioration of firms’ financial health.

Document de Travail n° 2016/03 - Are exchange rates driven by global or local factors?

2016-05-18T00:00:00+02:00

This working paper is the sole responsibility of the author. It is circulated in order to stimulate debate and to encourage comments and criticism.

This paper uses factor analysis to present an original explanation of floating exchange rate movements. I estimate the shares of domestic and external drivers of these evolutions and find that external common factors are the main drivers of exchange rates and that there is a common pattern for both advanced and emerging countries. These results are robust in time and across countries according to multiple robustness checks. I also provide economic interpretations of the underlying factors. If traditional drivers are found (US relative economic situation, commodity prices), I also find a selective perception of risk aversion between advanced and emerging economies. This work falls within the literature on monetary conditions (more precisely Mundell’s trilemma). The study covers 26 countries, and I detail how results vary between emerging and advanced economies.

Document de Travail n° 2016/01 - Concessional finance and ODA reporting of long term financial instruments

2016-03-08T00:00:00+01:00

This working paper is the sole responsibility of the author. It is circulated in order to stimulate debate and to encourage comments and criticism.

The rather unclear DAC definition of concessionality has created intense debate among DAC members and beyond. The 10% discount rate is not grounded on a sound definition, and the concessionality in character criterion, namely that interest rates on loans should be “below the prevailing market rate”, is also unclear. We advocate here for assessing concessionality through risk-adjusted discount rates. Such rates could easily be computed through risk and cost-of-funding proxies. For the sake of simplicity and clarity, as well as practicability considerations, we propose here to set only three distinct discount rates, relying on market and academic data on risk spreads. With such discount rates, one would be able to assess the concessionality of long-term financial instruments such as loans and guarantees. Every instrument found to be priced below private sector terms, proxied by risk-adjusted discount rates, should be considered as concessional. The corresponding grant element would then reflect the donor effort. In doing so, the DAC would restore incentives to operate more with least developed countries (LDCs) and other lower income countries (LICs), and contribute to address the massive long-term capital shortfalls these economies are facing. Based on empirical data, we found that only 10% of committed long-term concessional finance since 2006 was in favor of LDCs and LICs, while upper middle-income countries (UMICs) received nearly 30% of total committed amount. However, loans towards LDCs and LICs are found to be highly-concessional, with an average grant element of nearly 80%, interest rate of less than 1% for average maturities beyond 30 years. Risk-adjusted discount rates and appropriate safeguards (IMF/WB debt sustainability framework as well as concessionality thresholds) would change donor incentives, while better reflecting the operational framework and cost incurred to a greater exposure to LDCs and LICs (use of public money for provisioning uncovered risks, unhedged exposures, regulatory requirements and more broadly “advisory work” to secure enabling conditions for development results).

Document de Travail n° 2013/04 - Financial incitatives and labor market duality

2013-10-09T00:00:00+02:00

This working paper is the sole responsibility of the author. It is circulated in order to stimulate debate and to encourage comments and criticism.

The French labor market is divided between workers in permanent jobs and those who alternate fixed-term contracts with unemployment spells. Among other public policies aiming at reducing this duality, financial incentives could induce employers to lengthen contract duration or favor permanent contracts.

This article develops a matching model fitted to the French labor-market characteristics and calibrated on French data. A gradual decrease in unemployment contributions or a firing tax reduces the duality but increases market rigidity and lowers labor productivity. However, decreasing unemployment contributions gradually is less favorable for new entrants than a firing tax and lengthens unemployment spells. An additional contribution levied on short-term contracts to finance a bonus for permanent-contract hirings also decreases labor-market duality and increases activity but without negative impacts on labormarket flexibility and productivity.

Document de Travail n° 2013/03 - Presentation of the Institutional Profiles Database 2012 (IPD 2012)

2013-07-31T00:00:00+02:00

This working paper is the sole responsibility of the author. It is circulated in order to stimulate debate and to encourage comments and criticism.

This document presents the Institutional Profiles Database (IPD) 2012. The IPD provides an original measure of countries’ institutional characteristics through composite indicators built from perception data. It was designed in order to facilitate and stimulate research on the relationship between institutions, long-term economic growth and development.

The IPD 2012 follows on from the 2001, 2006 and 2009 versions. It covers 143 countries and contains 130 indicators derived from 330 variables describing a broad range of institutional characteristics structured in nine functions: 1) political institutions; 2) security, law and order, control of violence; 3) functioning of public administrations; 4) free operation of markets; 5) coordination of stakeholders, strategic vision and innovation; 6) security of transactions and contracts; 7) market regulations, social dialogue; 8) openness and 9) social cohesion and social mobility.

This document updates the presentation documents that accompanied previous editions of the database. More specifically, it provides an explanation of the analytical framework underpinning the database, it discusses the issues involved in measuring institutions and describes the methodology used in constructing the IPD 2012 database and calculating the indicators it contains.