France 1988-1989.

151 Pages·1989·8.674 MB·English

by  OECD

OECD
ECONOMIC
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ECONOMIC SURVEYS
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ORGANISATION FORECONOMIC CO-OPERATIONANDDEVELOPMENT
Pursuant toarticle 1 oftheConvention signed in Parison 14th December
1960,andwhichcameintoforceon30thSeptember1961,theOrganisationfor
Economic Co-operation and Development (OECD) shall promote policies
designed:
- toachievethehighestsustainableeconomicgrowthandemploymentand
a rising standard of living in Member countries, while maintaining
financialstability,andthustocontributetothedevelopmentoftheworld
economy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in ihe processofeconomicdevelopment;and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obligations.
The original Member countries of the OECD are Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United
States. The following countries became Members subsequently through
accession atthedatesindicated hereafter; Japan (28thApril 1964), Finland
(28thJanuary 1969), Australia (7thJune 1971) and New Zealand
(29th May 1973).
TheSocialistFederalRepublicofYugoslaviatakespartinsomeofthework
ofthe OECD (agreement of28thOctober 1961).
Public également en français.
OOECD, 1989
Application forpermission to reproduce ortranslate
allor part ofthis publicationshould be made to:
Head of PublicationsService, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France.
Contents
Introduction 1 1
I. Progress towards recovery 13
A substantial disinflation 13
An improved financial position with a pick-up in business
investment 19
II. Persisting macroeconomic disequilibria 30
Unemployment continuing to run high 30
A vulnerable foreign trade position 45
III. Industrial adjustment difficulties 55
Production capacity that has long been inadequate and ill-adapted 55
The influence of industrial policies pursued up to 1984 63
Shifts in policy orientation 70
IV. Economic policies, recent trends and short-term prospects 74
Fiscal and monetary policy settings 74
Economic developments in 1987 and 1988 88
Short-term prospects 96
V. Conclusions 98
Notes and references 103
Annexes
I. Determinants of the inflation differential between France and
Germany 114
II. Wage equation 116
III. Employment and wage determination: separate models for industry
and traded services 1 18
IV. Tables and diagrams 121
Statistical annex
Selected background statistics 136
A. Gross domestic product and expenditure 137
B. Indicators of prices and wages 138
C. Employment and labour market 139
D. The money supply and its counterparts 140
E. General government appropriation account 141
F. Commodity breakdown of foreign trade 142
G. Foreign trade by area 143
H. Balance of payments on a transactions basis 144
Tables
Text
1. Consumer prices 13
2. Disinflation in OECD countries 14
3. Import prices 15
4. Costs of the factors of production 15
5. Inflation differential between France and Germany 16
6. Determinants of wage restraint 18
7. Relative trends in services prices 19
8. Corporate profit ratios 20
9. Comparative trend in the components of the share of wages in value
added 22
10. Comparative trends in the rate of return on capital and its
components 23
11. Financing of non-financial enterprises (excluding GENs) 25
12. Interest costs and indebtedness of the industrial sector in France and
Germany 26
13. Investment behaviour 27
14. Unemployment trends across countries 31
15. Comparativetrendsin working-agepopulation,participation ratesand
total employment 32
16. Unemployment insurance replacement ratio 36
17. Simulated impact of a rise in real wages as rapid as that in
productivity 39
18. Cross-country comparison of the sensitivity of real wages to market
conditions 40
19. Trend of demand elasticities for industrial foreign trade 51
20. Foreign trade demand-elasticity gaps and potential growth in the
major OECD countries 56
21. Fixed investment and non-physical investment 58
22. Total factor productivity in manufacturing industries 59
23. Revealed comparative advantage in foreign trade by manufacturing
sub-sectors 61
24. Effectsofspecialisation and adaptation on theoverall trend ofmarket
shares in manufactures 62
25. Official aid to industry 64
26. Structure of domestic R&D funding by sector 66
27. "Normality" of manufactured import levels 67
28. Export credit subsidies in France (excluding those for military
hardware), 1985 69
29. Comparative indicators of competition on domestic and foreign
markets in the major OECD countries 72
30. Lending capacity by major government sector 74
31. Comparative fiscal policy settings 76
32. Structure of public expenditure 78
33. General government appropriation account 79
34. Apparent interest rate and general government debt 80
35. Inertia of lending rates and banks' "break-even point" 82
36. Demand and output 89
37. Appropriation account for households 90
38. Business investment 91
39. Changes in inventories 92
40. Current balance 93
41. Breakdown of saving and investment 94
42. Capital movements 95
Annex
Al. Exogenous factors contributing to the disinflation 121
A2. Breakdown ofchanges in the labour force 122
A3. Cost of employment policies 122
A4. Rigidity of hiring and firing procedures according to a 1985 EEC
Survey 123
A5. Elasticity with respect to competitiveness and foreign trade price
formation by industrial sector 123
A6. Comparative structure ofindustrial production by majorcommodity
groups 124
A7. "Strong points" of the major industrial countries 124
A8. Potential decline in the price of financial services as a result of the
establishment of the Single European Market in 1992 125
A9. Comparative importance and structure of wealth taxes in 1986 125
A10. Pension burden 126
All. Structure of tax revenue in 1987 126
Diagrams
Text
1. Rate of return on equity, real interest rate and leverage 24
2. Unemployment rates and vacancy rates 34
3. Unemployment rates and capacity utilisation rates in France,
Germany and the United States 37
4. Cross-country comparison of the relative cost of labour 38
5. "Tax wedge" on labour 42
6. Evolution of statutory minimum wages 43
7. Main components of the balance of trade in goods and services 46
8. Export/import ratio and market shares for manufactures 48
9. Domesticdemand differential and structural budget balance
differential 49
10. Trend of competitiveness 52
11. Profit rates on domestic and external markets 53
12. Relative importance of the "excess demand" regime in industry 57
13. General government net borrowing requirement, revenue and
expenditure 75
14. Trend of monetary aggregates and total domestic credit 84
15. Simulated and observed velocity of monetary aggregates 85
16. Short-term interest rates, exchange rates and foreign-exchange
reserves 86
17. Real interest rates and difference in yields 87
Annex
Al. Comparative trend of investment ratios 127
A2. Comparison of the relative share ofjobless receiving compensation 128
A3. Relative trends in export/import ratios for goods and services for
selected OECD countries 129
A4. Market share and price-competitiveness in the tourism sector 130
A5. Industrial terms of trade adjusted for product composition 131
A6. Relative investment performance and evolution of market shares 132
A7. Total general government tax revenues 133
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BASIC STATISTICS OF FRANCE
THELAND
Area (I000sq.km.) 549.2 Majorcities(1982),
Agriculturallandinu.se inhabitants:
(lOOOsq.km.), 1987 314.0 Paris 2188918
Marseille 878689
Lyon 418476
THEPEOPLE
Population 1.1.1987(thousands) 55510 Totallabourforce
No.ofinhabitantspersq.km 100 (1987,thousands) 24032
Totalincreaseinpopulation. 1987
(thousands) 232
PRODUCTION
Grossdomesticproduct,at Originofthegrossdomesticproduct,
marketprices,in 1987 almarketprices(1987):
(billionsofIrancs) 5282.9 Agriculture 3.5
GDPperhead(USJ) (1987) 15839 Industry 24.6
Grossfixedinvestment(1987): Construction 5.4
- percentofGDP 12.2 Services 66.5
- perhead(USS) 1926.6
Total 100.0
GENERALGOVERNMENT
(ESNAconcepts)
Currentexpenditurein 1987 (percentofGDP) 48.3
Currentrevenuein 1987(percenlofGDP) 49.3
Grossfixedinvestmentin 1987(percentofGDP) 3.1
FOREIGNTRADE
Exportsofgoodsandservices, Importsofgoodsandservices,
asapercentageofGDP(1987) 20.9 asapercentageofGDP,(1987) 20.6
Mainexportsaspercentageoftotal Mainimportsasapercentageoftolal
exports, 1987(SITC): imports, 1987(SITC):
Food,beveragesand Food,beveragesand
tobacco(0+ 1) 15.0 tobacco 10.6
Machineryandtransport Machineryandtransportequipment 34.8
equipment(7) 35.5 Ironandsteelproducts 5.4
Ironandsteelproducts(67+68) 6.2 Chemicalproducts 11.8
Chemicalproducts(5) 14.3 Mineralfuels,lubricants
Textileproducts(65) 3.2 andrelatedmaterials(3) 10.8
THECURRENCY
Monetaryunit:thefranc CurrencyunilsperUSdollar,
averageofdailyfigures:
Year 1987 6.0087
Year 1988 5.9559
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.