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RESEARCH

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Publications

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  • ​Dividend Taxes and the Allocation of Capital: Comment, joint with Laurent Bach, Antoine Bozio, and Clément Malgouyres. American Economic Review, 2023, vol. 113 (7): 2048-52.

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Working Papers

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We link French households’ tax records to the corporations they control, and build a payout-policy–neutral income measure, with corresponding tax burdens including those of "billionaires": the top 0.0002%. Defined as such, income is more concentrated than taxable income, it better predicts rich-list membership, and persists more among billionaires. Personal taxes remain progressive until the top 0.1%, but eventually decline to 2% of income. Corporate taxes are an imperfect progressive backstop, as total tax rates fall from 45% at the 0.1% threshold to 25% for billionaires. Among these, the tax burden is global and tax-efficient pyramidal control over businesses ubiquitous.

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We estimate behavioral responses to dividend taxation using recent French reforms: a rate hike and, five years later, a cut. Exploiting tax data at household and firm-level, we find very large dividend tax elasticities to both reforms. Individuals who control firms adjust dividend receipts instantaneously, accounting for most of the aggregate dividend reaction. Investment is insensitive to dividend taxation, except in small firms whose reaction is moderately negative. Dividend adjustments are instead driven by corporate saving, as owner-managers treat firms as tax-free saving vehicles. Small businesses’ profits decline following dividend tax increases, suggesting firms also serve as tax-free consumption vehicles.

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We investigate the impact of wealth taxation on behaviors of entrepreneurs in France. Before 2018, business sales triggered the conversion of tax-exempt business assets into taxable wealth. Using personal tax data, we confirm that retirement of entrepreneurs leads to large annual wealth tax payments. There is no evidence of higher expatriation by entrepreneurs following retirement, but their take-up of tax-favored investments in SMEs increases. The elasticity of such investments to the tax increase is far higher than for charity donations. These investments fall after financial wealth becomes tax-exempt in 2018. This evidence suggests that a wealth tax, combined with tax-favored investment schemes, may have encouraged former entrepreneurs to reinvest their wealth in SMEs. 

 

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Previously circulated as: 'Public Sector Pay and the Spatial Distribution of Economic Activity' and as 'Local Public Goods and the Spatial Distribution of Economic Activity'.

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In many countries, pay in the public sector is much less correlated to the local cost of living than wages in the private sector, leading to frequent calls for reform. This paper studies public pay reform using a general equilibrium spatial model. We introduce a public sector with market power in an otherwise standard spatial equilibrium framework. The model rationalizes several features in the French data, most prominently the dominant place of the public sector in the labor market and its similar relative size across local labor markets. We emphasize the tradeoffs between allowing governments to freely choose local public employment and wages (as in most of the US public sector), versus imposing rules that constrain public sector pay with some indexation to the local cost of living (as in many European countries). We show that wage indexation limits monopsony power –leading to a larger public sector– but also imposes costs on private sector workers through higher taxes and distortions to labor allocation. We estimate our model using French data and show that, in the French context, greater wage flexibility in the public sector would lead to positive welfare gains, heterogenous across locations and types of workers.

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Work in progress

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We investigate the efficacy of a one billion euros subsidy program in France (2009–2021) to promote biomass-based energy adoption in manufacturing. Leveraging the staggered nature of the treatment and rejected projects, we identify the causal effect of the subsidy. We find substantial investment responses aligned with applicants' pledges, while overall activity remains unchanged. Post-adoption, biomass usage rises, offsetting fossil fuel consumption and lowering CO2 emissions. We analyze program interactions with macroeconomic conditions. In particular, we document a "waterbed effect" on plants under the EU-ETS. Additionally, we explore the high abandonment rate of successful projects, showing firms exposed to energy price shocks are more likely to withdraw.

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Real-world wealth taxes include income-based caps to make sure income-poor yet wealth-rich households do not have to sell illiquid assets. We show in the French context that these caps are binding mostly among households at the top of the wealth distribution who own liquid yet income-tax-deferred assets. When the wealth tax was cancelled in 2017, these households quickly generated taxable income out of those financial assets. Inversely, when the wealth tax cap was temporarily suspended in 2012, they did not turn those assets into income in order to pay the tax. We conclude that caps reduce the proceeds from wealth taxes precisely when wealth would be a better proxy for taxpaying ability than income.

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Non peer-reviewed publications

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Old Work

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The geography of innovation is characterized by two main stylized facts: knowledge primarily spills over to neighbouring inventors, and knowledge production is spatially more concentrated than economic activity. The second fact appears as a natural consequence of the first one: firms should cluster in space to take advantage of new knowledge produced around them. Yet, very little is known about how innovative firms internalize spillovers in their location choices. This paper focuses on innovative firms’ decisions to relocate a R&D plant. Using data on French firms, it starts by building two sets of stylized facts to describe R&D plant relocations. Firstly, R&D firms are more mobile than the average firm employing high-skilled workers, moving both more frequently and further away. Secondly, innovative firms are less likely to move if they are locally well connected, and tend to choose locations with a high potential for knowledge spillovers if they do move. To rationalize these facts, I build a theoretical framework emphasizing the effect of existing local connections to neighbouring inventors on relocation decisions. I introduce a novel stability concept, characterize stable networks, and show the extent to which movements may occur in cascades.

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  • R&D collaboration networks with localized university spillovers.

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I examine a model of innovation oligopoly in which technological spillovers are determined both by explicit links of collaboration between firms and by the choice of locating near a public research centre or staying in the periphery. The structure of the collaborations network is exogenous while location choice is endogenised. Following Ballester et al. (2006), for reasonably small network effects, I show that the level of output (R&D effort and quantities) is determined by the Bonacich centrality of firms. Moreover, I show that there is a cutoff value of centrality above which all firms move near the university, and a cutoff value of centrality below which firms always stay in the periphery. This allows for multiple equilibria when several firms’ centralities are contained between these two cutoff values, for which the strategic complementarities and substitutabilities of entry choices are explored. The effect of two public policy instruments is addressed, and shows that while only the degree distribution matters for standard subsidies, the assortativity of the network will matter if university spillovers are raised.

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