TY  - JOUR
AU  - Gourio,François
AU  - Roys,Nicolas A.
TI  - Size-Dependent Regulations, Firm Size Distribution, and Reallocation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18657
PY  - 2012
Y2  - December 2012
UR  - http://www.nber.org/papers/w18657
L1  - http://www.nber.org/papers/w18657.pdf
N1  - Author contact info:
Francois Gourio
Department of Economics
Boston University
270 Bay State Road
Boston, MA 02215
Tel: 617/353-4534
Fax: 617/353-4449
E-Mail: fgourio@bu.edu

Nicolas A. Roys
University of Wisconsin-Madison 
Department of Economics
1180 Observatory Drive
Madison 53703 WI
E-Mail: nroys@ssc.wisc.edu
AB  - In France, firms with 50 employees or more face substantially more regulation than firms with less than 50. As a result, the size distribution of firms is visibly distorted: there are many firms with exactly 49 employees. We model the regulation as a sunk cost that must be paid the first time the firm reaches 50 employees, and we estimate the model using indirect inference by fitting these salient features of the size distribution. The key finding is that the legislation acts like a sunk cost equivalent to approximately one year of an average employee salary. Removing the regulation improves labor allocation across firms, leading to a productivity gain of around 0.3%, holding the number of firms fixed. However, if firm entry is elastic, the steady-state gains are significantly smaller.
ER  -