Four principles for an effective state
Jean Tirole 13 October 2014
This column by the 2014 Nobelist Jean Tirole was originally posted on 16 July 2007. It gives his views on reforms that are as necessary today as they were in 2007. Meeting the expectations of its citizens will require the French state to become more effective. A four-pronged approach is required: restructuring, competition, evaluation and accountability.
High quality public services, infrastructure that facilitates “economic dynamism”, a reduction in the debt left to our children. These expectations of the French people cannot be met unless the state becomes effective. Reforms are urgent, but difficult. To achieve them, a four-pronged approach is required: restructuring, competition, evaluation and accountability.
Europe's nations and regions Politics and economics
Monetary policy without interest rates: Evidence from France (1948 to 1973) using a narrative approach
Eric Monnet 05 July 2014
The Global Crisis has raised the interest of banks in using quantitative controls, such as credit controls. This column discusses a relatively recent historical episode of credit controls in France. During this episode the role of interest rates was almost eliminated. Quantitative controls effectively decreased output and prices in the short-run. The difficulty for the Central Bank stemmed from the fact that it had to change its instruments constantly. This historical episode demonstrates that macroprudential tools can have substantial effects on monetary policy.
Recent central bank interventions following the Global Crisis have raised new interest in quantitative measures as instruments of monetary or macroprudential policy (Borio 2011, Galati and Moessner 2013). In fact, quantitative controls – especially credit controls – have been used as primary tools of monetary policy for decades in western Europe and east Asia, usually during periods when these countries were experiencing their highest ever rates of growth. Many countries, including Brazil, India, and China, still use them today.
Europe's nations and regions Monetary policy
France, monetary policy, credit controls
Can history leave towns struck in places with bad locational fundamentals?
Guy Michaels, Ferdinand Rauch 08 December 2013
The world is urbanising quickly but many cities are poorly located. Such misplacement is associated with bad access to the world markets and frequent natural disasters. This column explores historical evidence of French and English towns during the Roman Empire and in the Middle Ages. Path-dependency in the city locations explains the difference in their development and suggests relevant policymaking lessons.
The world is urbanising rapidly (World Urbanization Prospects, the 2011 Revision). Some of its rapidly growing cities, however, seem to be misplaced. They are located in places hampered by poor access to world markets, shortages of water, or vulnerability to flooding, earthquakes, and volcanoes.
This outcome – cities being stuck in the wrong places – has dire economic and social consequences. When thinking about policy responses, a key research question is whether historical events can leave towns trapped in suboptimal places.
Development Economic history Frontiers of economic research
France, England, city locations, Roman Empire
High-end variety exporters defying distance: Macro implications
Julien Martin, Florian Mayneris 04 December 2013
While quality upgrading is always viewed positively in both policy and academic circles, little is known about the macro implications for countries of specialising in high-end varieties. This column presents evidence that high-end variety exporters are less sensitive to trade costs. This implies a greater geographic diversification of exports, which compensates for their higher sensitivity to demand shocks and smoothes aggregate volatility. It also increases export growth when business opportunities arise in distant markets.
Vox columns by Peter Schott (2007) and Fontagné et al. (2008) have argued that developed countries specialise in the production of high-end varieties – expensive varieties of a product which have specific attributes such as reputation, branding, or quality that make them appealing to consumers in spite of their higher price. A few papers have examined the implications of such a specialisation for the labour market (e.g. Verhoogen 2008). However, while policymakers and academics encourage specialisation in high-end varieties, the macroeconomic consequences have not yet been examined.
France, trade, exports, luxury goods
Exports and property prices: Are they connected?
Balázs Égert, Rafał Kierzenkowski 02 October 2013
Decreasing world market share in exports threatens France’s recovery. Traditional determinants of exports do not fully explain the downturn. This paper presents a novel explanation for France’s declining exports: the real-estate boom. Strong profitability in the construction industry, led by rising house prices, diverted capital and labour from export-intensive industries. These results suggest a strong warning against policies supporting property ownership as an end in itself.
A marked decline in France’s export-market shares
Europe's nations and regions International trade
France, housing, exports, real estate
Accounting for the ethnic unemployment gap in France and the US
Laurent Gobillon, Peter Rupert, Étienne Wasmer 23 July 2013
The unemployment rate in France is roughly six percentage points higher for African immigrants than for natives. Why? This column argues that the explanation is spatial: recent immigrants tend to have much longer commute times. Research suggests that in the region of 20% of the employment gap between the French minority and the French majority can be put down to commute times, but more research is needed, especially in France where research into the ethnic unemployment gap is scarce.
The unemployment rate in France is roughly six percentage points higher for African immigrants than for natives. In the US, the unemployment rate is approximately nine percentage points higher for black people than for white people. The gap between the minority (African immigrants or black people) and the majority (natives or white people) remains important even after controlling for individual attributes such as education, age or other demographic characteristics.
Europe's nations and regions Labour markets
France, unemployment, race, ethnicity, commuting
Do large departments make academics more productive? Agglomeration and peer effects in research
Clément Bosquet, Pierre-Philippe Combes 21 June 2013
Every academic has an opinion about what makes a good department. This column brings evidence from French economics departments. It suggests that larger departments are associated with slightly more but no better publications per academic. And while diversity in terms of researcher quality lowers average publication quality, diversity in research topics increases it.
Every academic has an opinion about what makes a good department. Surprisingly, there are few hard studies quantifying this precisely, although possible implications for an optimal design of education and research policies are numerous. Aghion et al. (2010) is an example of the general recent concern about the optimal design and governance of universities.
In our recent work, we try to start filling this gap and study the effect on individual publication records of a large set of department characteristics (Bosquet and Combes 2013).
Education Productivity and Innovation
France, Peer Effects, agglomeration
Small isn’t always beautiful: The cost of French regulation
Luis Garicano, John Van Reenen 30 May 2013
France has a raft of labour-market regulations that kick in for firms with 50 workers or more. This column uses this threshold to identify the economic effects of size-contingent regulations. Such policies seem to subsidise small firms at the expense of larger firms. But since small firms are on average less productive than large firms, the French economy loses out.
Slow growth in Europe has led to a debate over whether structural reforms can be used to raise productivity (see Costello et al. 2009, Crafts 2012). Many countries have tough labour regulations which may be a barrier to growth. Quantifying the welfare costs of such regulations has proven elusive, however, and policymakers are reluctant to spend scarce political capital reforming labour laws when the benefits are uncertain and vociferous opposition is assured.
Europe's nations and regions Labour markets
France, Labour Markets, Eurozone crisis
France’s weak economic performance: Sick of taxation?
Balázs Égert 10 May 2013
France has recorded one of the lowest real per capita income growth levels in the OECD over the last 20 years or so. One of the many structural weaknesses causing this weak performance is the French tax system. This column argues that complexity, instability and non-neutrality coupled with very high effective tax rates in many areas of the French tax system put a heavy burden on the economy.
France is often labelled these days as one of Europe’s problem children (The Daily Telegraph 2013, Handelsblatt 2013). Indeed, France is one of the OECD countries which has recorded the weakest real per capita income growth over the last two decades or so (Figure 1). This weak economic performance can be explained by the country’s structural weaknesses in many areas, including taxation. The high tax burden (43% of GDP in 2010) and the structure of the tax system weigh heavily on the economy.
Europe's nations and regions
France, reform, taxation, Eurozone crisis
Wine tasting: Is 'terroir' a joke and/or are wine experts incompetent?
Orley Ashenfelter, Olivier Gergaud, Victor Ginsburgh, Karl Storchmann 01 March 2013
Does terroir really affect a wine’s quality? This column argues that alleged experts repeatedly cannot tell a superstar wine from a cheaper bottle. Like many cultural commodities, it seems that the quality of wine is not an objective trait. Rather, these commodities become whatever we want them to become.
In a paper on terroir, an elusive word coined by French wine growers and traders that means something along the lines of ‘sense of place’, Gergaud and Ginsburgh (2008) show that the differences between natural endowments – region, type of soil and its chemical composition, exposure of vineyards – in the Pauillac, Margaux, Saint-Estèphe, Saint-Julien, and Haut-Médoc regions have no effect on the quality of wines.
Frontiers of economic research
US, France, wine, terroir