Imports and Labour Market Imperfections: Firm-Level Evidence from France

This paper examines the presence of labour market imperfections in France, that lead to market power on the side of either firms or their workforce, and investigates the role of import competition as a possible discipline device. Using information on a large panel of French manufacturing firms, we find that Chinese competition lowers the positive gap between actual wages and the level that would prevail under perfect competition, thus strengthening firms’ position. This adjustment does not take place via a fall in wages, but rather through an increase in productivity. Finally, import competition compresses price-cost margins and induces quality upgrading among French manufacturers.