The French 2016 SMEs hiring subsidy, an evaluation based on pre-hiring declarations

The French hiring subsidy program for SMEs was implemented in January 2016 and financed the creation of new long-term contracts for workers earning less than 1.3 times the hourly minimum wage. This study is aims at evaluating this measure. It has been conducted using the pre-hiring declarations filled by French employers. The subsidies granted in 2016 amounted to 2.6 billion euros and financed 965 000 hires. About 55% of the hires that qualified for the program actually benefited from a subsidy. Descriptive statistics suggest that the growth in hires in fixed-term contracts lasting at least 6 months was more pronounced for firms with less than 250 workers (treated firms). In order to see if this is a causal effect of the program, the discontinuity in the eligibility to the program at the 250 workers threshold is leveraged in difference-in-difference estimations. Results suggest that the program increased hires in permanent contracts. The impact on employment appears to be limited by substitution effects between permanent contracts and fixed-term contracts lasting less than 6 months. In an alternative identification setting, the effect of the program on firms with less than 50 workers is isolated using the heterogeneity of exposure to the measure across labor markets. The program seems to have increased hires in fixed-term contracts lasting at least 6 months, the effects being concentrated on firms having between 10 and 49 workers.