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Sarkozy’s Economic Policy. CES, November 1, 2007. Solving Problems. “The French didn’t elect me to comment on their situation. They elected me to solve problems.”. Caveat: Beware of Economic Statistics.

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Sarkozy’s Economic Policy

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Sarkozy’s Economic Policy

CES, November 1, 2007

Solving Problems

  • “The French didn’t elect me to comment on their situation. They elected me to solve problems.”

Caveat: Beware of Economic Statistics

  • To say that net output to-day is greater, but the price-level lower, than ten years ago or one year ago, is a proposition of a similar character to the statement that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth—a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus.

  • -- John Maynard Keynes

We are a great nation …

… but we are losing ground

Well-Being: log real gdp per capita

Keeping up with the Joneses

Keeping Up with Joneses 2

Trade Openness

FDI flows

Foreign Direct Investment Inflow 06

Portfolio Investment


Why are we losing ground?

We are highly productive ….

Labor Productivity Trends

TFP Growth in Services

… but we don’t

  • Work as many hours

  • Work as many years

  • Put as many people to work

Annual Hours Worked per capita

Hours worked change over 3 decades

Current Unemployment

Tax Wedge

Government Spending and Debt

Additional Budget from Ageing Population

Growth of Public Debt

Policy Implications

  • Acte pour le travail, l’emploi, et le pouvoird’achat (TEPA)

  • Supply Side (Travailler plus)

    • Detaxing of overtime, nip at 35 hr wk

      • Cost 6 bneuros

    • Reform of special regimes, later of general regime

    • Labor market reforms=UNEDIC/ANPE merger, continuing ed

    • Single labor contract

    • Minimum service

Policy Implications 2

  • Demand Side (plus incentives)

    • Mortgage Deduction

    • Inheritance tax reduction

    • Fiscal Shield Reduction

    • Total cost: 8 bneuros

Policy Implications 3

  • Deficit Reduction

    • Medical copays

    • End special regimes, increase contribution time

    • Social VAT??

  • Purchasing Power

    • Galland, Raffarin, and Royer Laws

Policy Implications 4

  • Eurogroup meeting, clashes with Germany, Trichet, Juncker

    • Interest rates

    • Exchange rates

    • Energy market rationalization/nationalization (GDF-Suez, Areva, Gazprom)

    • EADS reorganization

    • Competitivity Clusters

    • University Reform

Purchasing Power & Career Incentives

Consumer Price Index

Income and Wealth Distribution

Earnings Dispersion

Earnings Dispersion

Unionization Rate

Min Wage inv. Rel. to Union rate

Pct workers paid minimum wage

Research & Development

“One can be impressed, I think, without being surprised, but I don’t think one can be surprised without being impressed.”

-- Mme de La Fayette

Extra Data

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