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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


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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