It has been exactly 26 years since I left France and migrated to the United States, first to complete my PhD at Harvard and then to begin my academic career. Since then my only trips back to France have been for short summer vacations. I have now started my sabbatical at the Paris School of Economics, and have thoroughly enjoyed my first few weeks here.
This is a great opportunity to observe the French economy and to comment on it using the somewhat detached approach of a former insider who moved outside and is only temporarily returning. So I’m going to start a series of blog posts on the political economy of France.
Two things struck me since I arrived in Paris. The first is the extent to which people spend time on leisure activities. The second is the relative size of the public domain relative to private space. Let me elaborate.
At pretty much any time of day the cafés in Paris are teaming with people. The crowds get denser in the evenings. People shop for food at all hours of the day. On weekends, the walkways near the Seine river are bustling with so many people - both tourists and locals - that cyclists have to slow to a crawl and joggers have to slalom to get through. Public transportation is crowded at pretty much any time of day. These observations are anecdotal, but they are borne out in the data. The French have one of the shortest workweeks in the industrialized world, one of the earliest effective retirement age, among the longest mandated paid vacations, and the unemployment rate has hovered around 9% for three decades. Youth unemployment clocks in at 22.3%. In France, the number of hours worked per capita, in other words, is very low - both because comparatively few people work and because those who are employed work few hours over the course of a year. There are many causes for this phenomenon. One is preferences - people value leisure more than elsewhere. Another is policies - for instance the heavy taxation of labor income - which discourage work and reward idleness.
My second observation has to do with the relative prominence of public versus private space. In Paris, public parks are numerous and impeccably maintained. Museums, virtually all of them government-run, are pristine and superbly endowed. If you ever drive on French highways, you will marvel - and despair at the sorry state of American infrastructure in comparison. In France, public services are generally efficient and well-run. Move into the private space, however, and you see a different picture. Even people at the top of the social totem pole live in small apartments, earn low incomes net of taxes, drive tiny cars (if they have cars at all) and generally enjoy a much lower level of private consumption than is seen, say, in the United States. A major cause of this very French characteristic is once again the high rate of taxation, which implies an allocation of GDP that gives prominence to public expenditures relative to private spending. The share of government spending in GDP is a staggering 56.6%, the second highest in the industrialized world after Finland. With all this spending, the French get high levels of public services and low income inequality. The cost is a reduced scope for private prosperity.
We should be careful before we judge these facts from a normative perspective. These are partly social choices that reflect the population’s underlying preferences. Who am I to judge the French if they want to sip lattes at 3 pm and enjoy pristine museums, at the cost of a big apartment and a nice car? But it is hard to believe that low labor supply and low private consumption are only the result of social and cultural preferences. Policies come from institutions. Institutions don't always deliver policies that correspond to the "will of the people". I will return to these themes in subsequent posts.