Published on 16 June 2005
An Economic Survey is published every 1½-2 years for each OECD country. Read more about how Surveys are prepared.
The OECD assessment and recommendations on the main economic challenges faced by France are available by clicking on each chapter heading below. Chapter 1 identifies the challenges for which the subsequent chapters provide in-depth analysis and policy recommendations.
Chapter 1. Key challenges facing France
This chapter outlines the key challenges facing the French economy. Although a modest economic upturn seems to be established, low growth and, especially, high unemployment characterise recent economic performance. The government has taken numerous initiatives to encourage growth and employment. But many of these will at best have only short-term effects, and the necessity to intensify structural reforms has to be recognised. Three key challenges are identified in this chapter: i) to ensure medium-term fiscal sustainability while improving the structure of the tax system to improve incentives and reduce costs; ii) to end the insider-outsider duality in the labour market and to increase employment rates among the low-skilled and certain specific groups, by reforming labour market institutions; iii) to improve prospects for both growth and employment creation by further reforms to promote competition.
Chapter 2. Making the Fiscal system Sustainable and more efficient
Over the past two decades public debt as a percentage of GDP has risen almost without pause, and the shares of public expenditure and revenues in GDP remain among the highest in OECD countries. Control of expenditure has been particularly difficult in the social and health insurance sector. The tax and social security contribution system are rather complex creating high administrative costs and a number of distortions to incentives. This chapter recommends: i) continuing efforts to control health and other expenditures, and reviewing the way in which some expenditure responsibilities and associated financial resources are decentralised; ii) simplifying the structure of personal income and other taxes; iii) consideration of a closer link between collection and calculation of personal income tax and collection of social security contribution and the CSG; iv) the continuation of efforts to remove distortions in a number of areas, from high marginal tax rates on low incomes to the favouring of different sources of finance in capital taxation.
Chapter 3. Improving labour market performance
With high unemployment, low participation of specific groups such as the low-skilled and those nearing retirement age, and relatively low average hours worked, France is far from using its full labour potential. Improving the labour market situation would not only increase living standards and growth potential but also reduce social exclusion and ease pressures on public spending. This chapter discusses the need for a comprehensive reform of the labour market aiming at: i) shifting the burden of social protection in the labour market away from employers towards the state by reducing and streamlining employment protection legislation; ii) removing incentives that lead to early withdrawal from the labour market; iii) allowing employers and employees more freedom to negotiate working hours; and iv) improving efficiency in job placement services.
Read also ECO Working Paper 504 Improving labour market performance in France
Chapter 4. Product market competition and economic performance
France is catching up with best practice in competition policy reform. However, other policy considerations often hamper the emergence of effective competition. Relatively weak competitive pressures obtain in a number of sectors, particularly in sheltered service industries. Restrictions on competition reduce productivity growth and hinder job creation in regulated sectors. Policy must give more weight to overall consumer welfare against the opposition of relatively small vocal special interest groups. This chapter discusses reforms that would increase competition by: i) strengthening the institutions and better clarifying responsibility for competition enforcement; ii) reinforcing the ability of sector regulators to improve non-discriminatory third-party access and other aspects of competition in the network industries iii) abolishing overly prescriptive regulation in the retail sector; iv) removing unnecessary protection in some professional services.
See also ECO Working Paper 473 Product market competition and economic performance in France
A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
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For further information please contact the France Desk of the OECD Economics Department at firstname.lastname@example.org. The OECD Secretariat's report was prepared by Paul O'Brien, Stéphanie Jamet, Jens Høj, Michael Wise and Howard Oxley under the supervision of Willi Leibfritz.
Economic Survey of France - Press Review