April 26, 2004
Despite high unemployment (currently at 9.1 percent), sluggish gross domestic product (GDP) growth and poor consumer confidence, things aren't as gloomy as they appear in France, say researchers.
Over the past 30 years, productivity growth has been higher in France than in the United States. Moreover, productivity levels are about the same between the two countries -- only the French have used higher levels of productivity to increase their leisure time, while Americans have sought to increase income:
- France's GDP per person stands at 71 percent of GDP per person in the United States, largely due to the French working two-thirds as many hours as their American counterparts.
- Though France has recently mandated a 35-hour workweek and routinely imposes high marginal tax rates, it appears most French workers are working less voluntarily.
- After controlling for such economic differences as unemployment rates and the average amount of capital necessary to create a job -- France's productivity per hour is just 10 percent lower than in the United States.
Thus contrary to widespread perceptions, researchers say, France has done very well over the past thirty years. They credit the European Commission (EC) with a strong role in bringing about economic reforms in France, such as market liberalization and clamping down on excessive state aid.
In addition, France has adopted some modest reforms of its own, particularly in its labor markets. For instance, unemployment insurance benefits have been reduced (if only slightly) and the country has adopted a negative income tax, reducing the emphasis on the minimum wage to bring about higher income for low-skilled workers.
Source: Olivier Blanchard, "The Economic Future of Europe", Working Paper 10310, National Bureau of Economic Research, February 2004.
Browse more articles on Economic Issues