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Is the Competitiveness and Employment Tax Credit effective?

Investissement

InvestissementThe objectives of the Competitiveness and Employment Tax Credit – CICE – are multiple – international competitiveness, employment, innovation…-, as are its mechanisms and the ways in which it can affect the economy: lower labor costs, higher financial margins, investment…. It therefore makes sense to assess the extent to which each of the mechanisms has been activated, and the results.

This is what this LIEPP project – Interdisciplinary assessment of the impact of the CICE and its effects on employment, innovation and competitiveness – intends to determine while seeking to identify potential impediments or blocking factors.

The Competitiveness and Employment Tax Credit was introduced with the stated goal of improving the competitiveness of businesses “through, in particular, efforts in the areas of investment, research, innovation, training, recruitment, new market development, ecological and energy transitions, and the rebuilding of working capital”.

Use of this measure can have multiple effects on businesses’ distribution of remuneration and their price competiveness and innovation strategies, as well as workforce skill structures. The study of the CICE’s various channels of impact and the potential barriers to its use are at the heart of this research project, which is currently led by the LIEPP in partnership with France Stratégie.

The LIEPP’s interdisciplinary assessment involves two key methodologies. The research includes a qualitative component that aims to uncover the drivers of use or non-use of the CICE in businesses and forms of appropriation through the analysis of the concrete ways in which it is used. With this aim in mind, semi-structured interviews with key decision-makers regarding CICE use were conducted.

In addition to this qualitative dimension, ex-post quantitative estimates were made of the CICE’s effects on the wage structure of businesses, on employment levels and on export prices and volumes. This statistical work on the CICE’s impact is based on a panel drawing on three exhaustive databases on French businesses, that is: social declarations enabling a reconstitution of salary totals and distributions for each business, the tax filings of these businesses and customs data on exports.