Comment

Abstract

Much effort in modern labor economics is devoted to finding “natural experiments,” which can be peculiarities in legislation that give rise to different treatments of otherwise similar subjects. When the interest is labor market policy, in Europe usually the unit of analysis is the nation. Countries are small and policies are national, but there are still significant policy differences across countries. Cross‐country analyses, usually with panels of data going back to the 1970s, have shed important light on the impact of labor market policies on the economy. But they have been plagued by the fact that despite the convergence that is taking place in the context of the European Union, there are still large differences in many other dimensions across the union. Identifying the impact of policy from that of other national characteristics has been difficult. Chemin and Wasmer’s paper identifies a peculiarity in the coverage of legislation in France across its regions that enables a more reliable analysis of the impact of policy, on the assumption that other regional differences within France are less important than, say, differences between France and Germany. An area of France, Alsace‐Moselle, was under German jurisdiction between 1870 and 1918, and many laws that were brought in at that time are still in force. Subsequent changes in French legislation sometimes applied differently in Alsace‐Moselle than in the rest of France, and so one can do a “difference‐in‐difference” comparison of the response to the legislation change in Alsace‐Moselle with the response in the rest of France. Given that the reason that policy coverage is different in Alsace‐Moselle than in the rest of France is exogenous, this would be a valid comparison. Of course, a simple comparison without any correction requires that Alsace‐Moselle be identical in all other respects to the rest of France. This, however, is not likely to be the case. For example, they are the only regions in France that share a border with Germany, and this alone