Summaries in English *

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1 Summaries in English * What amount of public debt in 2030 in France? Eric Heyer, Mathieu Plane and Xavier Timbeau The financial and banking crisis in France, as in all industrialized countries, has had a considerable impact on the activity and evolution of public finances. If the lack of activity accumulated since the beginning of the crisis is expected to take over the next decade, the level of public debt (percent of GDP), however, should keep long-term effect of this crisis (2030). The purpose of this paper is to assess from different growth scenarios, the different trajectories of balances and public debt over the next two decades. Finally, beyond the uncertainties concerning the evolution of long term growth, we tested sensitivity to long-term debt to several assumptions (sustained rise in interest rates, fiscal policy more or less restrictive, etc.). Keywords: Long term outlook. Public debt. Public deficit. JEL classification codes: E2, E62, E66, H68. What fiscal exit strategies in the EU, the US and Japan? Sabine Le Bayon, Catherine Mathieu, Paola Monperrus-Veroni, Mathieu Plane, Christine Rifflart and Danielle Schweisguth The crisis has led public finances in industrial countries to deteriorate strongly due to a fall in tax receipts, the implementation of fiscal recovery plans and rescue packages for the financial sector. The article provides an analysis of public finances latest developments with prospects up to 2013 for France, Germany, Spain, the UK, the US, and Japan. The deterioration will be particularly substantial in Spain and the UK, while it will be more modest in France and Germany. Public deficits and debts will remain higher in 2013 than before the crisis despite fiscal contraction being implemented as soon as 2010 in Spain and the UK, and 2011 in the other countries under review. However, it will be crucial for the economic recovery that fiscal policies are not tightened too early. Keywords: Fiscal policies. Exit strategies. JEL classification code: E62. * La Revue de l OFCE est référencée dans ECONLIT REVUE DE L OFCE 112 JANVIER 2010

2 SUMMARIES IN ENGLISH From statistical discrimination to positive discrimination Remarks on probabilistic inference Maxime Parodi Statistical discrimination is the rejection of an individual because of some defects observed or believed on the aggregate characteristics of his group. Unlike negative discrimination, the rejection does not rely on prejudice or racial or gender bias, but on a probabilistic inference about some decisive characteristic. It is a rational motive, but this rational does not say the entire story: to reject supposes not only to evaluate probabilities, but also to choose some risks and this cannot be done without practical considerations. The rationality of discrimination lies then on a context-dependant reasoning which could not be underestimated. It appears then that the lack of individual information could also justify a reasonable bet like positive discrimination or affirmative action. Keywords: Statistical discrimination. Affirmative action. Rationality. JEL classification code: J7. The benefits of health: an insight from endogenous growth theory Philippe Aghion, Peter Howitt and Fabrice Murtin This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose a unified framework that encompasses the growth effects of both, the accumulation and the level of health. Based on cross-country regressions where we instrument for both variables, we find that a higher initial level and a higher rate of improvement in life expectancy both have a significantly positive impact on per capita GDP growth. Keywords: Health. Life expectancy. Mortality. Economic development. Economic growth. Endogenous growth. Instruments. JEL classification codes: E20, I10, O40, J11. Theoretical critique and empirical testing of OECD advocated growth policies François Boye The Going for Growth Reports published since 2005 by the OECD have already established their credibility at the international level. Even so, this paper claims that they are failing on two counts. On the one hand, their concepts are not totally in accordance with exogenous or endogenous growth theory. On the other hand, the OECD s growth policy recommendations cannot stand the test of macroeconomic simulation. None of them either has positive effects across all G REVUE DE L OFCE 112 JANVIER 2010

3 SUMMARIES IN ENGLISH countries or can raise any G-7 country s GDP growth forecasts by one percentage point in each and every year of the 2009 to 2014 period. Keywords: Growth. Convergence. Total factor productivity. Destructive creation. Product and labor market deregulation. JEL classification codes: O3, O4, O5. Automatic indexation rules of the French minimum wage (SMIC) Gilbert Cette and Etienne Wasmer Contrary to most European countries, indexation rules of the French minimum wage are very precise. However, three possible rules are consistent with the texts, which diverge in particular in periods of deflation or of negative growth of real wages. The alternative interpretations can have a large impact on the dynamics of the minimum wage, on the dynamics of real wages compared to productivity and on the bottom of the wage distribution. This note examines the three rules and recommends the optimal one, which appear to be most robust to alternative scenarios of inflation and deflation. Keywords: Minimum wage. Wage dynamics. Wage-price Spiral. Inflation. JEL classification codes: J3, J5, J50. Macroeconomic volatility and the French minimum wage indexation rule Hervé Le Bihan and Guillaume Horny The specific rule governing the increases in the French minimum wage (SMIC) can lead to a change in the minimum wage which is larger than the change of the workers hourly base wage (SHBO), as did happen in 1985, 1987 and In this note we show that the probability of such an event depends on both the variance of the inflation rate and that of the real wage growth rate. When macroeconomic volatility is fairly low, as was observed from 1996 to 2007, we estimate this probability to 6%. The average increase of the SMIC is larger than the average growth of the SHBO only in a much more unstable setting, characterized by fluctuations in inflation and real wages of magnitudes five times greater. Keywords: Inflation volatility. Minimum wage. Workers hourly base wage. Wage indexation. JEL Classification codes: E24, E31, J38. REVUE DE L OFCE 112 JANVIER

4 SUMMARIES IN ENGLISH Country size and growth strategy Éloi Laurent and Jacques Le Cacheux We present in this article a summary of our work on the relation between country size and growth strategy. We begin by reviewing the major steps in the literature on the economics of country size, focusing on contemporary contributions, from the Robinson volume (1960) to Alesina and Spolaore s book (2003). We then present the theoretical and empirical results we have developed within the ANR project country size and growth strategy, results that allow us to highlight, using the European Union as a reference case, an institutional macroeconomics of country size. We finally draw a number of implications of this work for the European Union, the euro area and beyond. Keywords: Country size. Growth strategy. Small country. European Union. Eurozone. JEL classification codes: O11, O57, F15, F43. Country size, economic performance and the political economy of the euro zone An empirical study of the size divide Olfa Alouini How country size influences economic performance is an area that has received renewed interest, especially with Rose (2006), who found no pattern between a country s size and its economic performance at the world level. However, when assessing the economic performance of EMU countries, a size divide appears between small, and fast-growing economies and larger laggard ones. I explain this phenomenon by examining how the institutional settings of the EMU namely, the Stability and Growth Pact and the European Central Bank suit the economic policies of smaller economies and hinder those of the larger ones. The econometric analysis, ran with panel data for the fifteen euro-zone countries ( ) and for robustness, with data on the pre-emu period and on countries that opted out of the monetary union, confirms that the size divide in terms of economic performance is a by-product of the monetary union. Keywords: EMU. Euro zone. Monetary union. Political economy. Country size. Heterogeneity. Economic growth. JEL classification codes: E60, F REVUE DE L OFCE 112 JANVIER 2010

5 SUMMARIES IN ENGLISH Country size, appropriate policy, and economic performance Some evidence from OECD countries Mauro Napoletano and Jean-Luc Gaffard This paper empirically investigates the interplay between economic performance and policies in OECD countries. Macroeconomic theory focuses on supply policies as a key determinant of country s economic performance. Aggregate demand can play a role only in the short-run. This view rests on the assumption that the economy is always in equilibrium. However, market distortions may impede the adjustment of the economy to equilibrium and leave room for demand also in the long run. Our analysis reveals the presence of marked cross-country differences in economic performance, according to country size and EMU membership. Furthermore, we show that differences in performance are related to diverging dynamics in domestic vs. external demand components, and to different fiscal, openness and structural policies. Finally, we discuss how these results contribute to revise the standard view about supply and demand policies in the determination of economic performance. Keywords: Economic growth. Aggregate demand. Country size. Distribution dynamics. Demand and Supply policies. Euro area. JEL Classification codes: E63, E65, C14. REVUE DE L OFCE 112 JANVIER

Demographics and Secular Stagnation Hypothesis in Europe

Demographics and Secular Stagnation Hypothesis in Europe Carlo Favero (Bocconi University, IGIER) Vincenzo Galasso (Bocconi University, IGIER, CEPR & CESIfo) Growth in Europe?, Marseille, September 2015