The French Economy

Theory And Policy

Jacques Melitz, Charles Wyplosz

• Publisher: Routledge
• Year: 2022
• Print ISBN: 9780367292300
• eBook ISBN: 9781000301601
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This volume brings together the proceedings of a conference held at the Institut Europeen d' Administration des Affaires (INSEAD) at Fontainebleau on July 5, 6, and 7, 1982. Summer conferences abound in the Paris region. That it was possible to attract an imposing international cast of economists within walking distance of the historic castle of Fontainebleau and one hour away from central Paris by car during the month of July is nothing especially surprising. But in this case there was a particular motivation for choosing the French site.

Profitability, employment and structural adjustment in France

Pentti J. K. KOURI,

Jorge Braga de MACEDO

Albert J. VISCIO*

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DOI: 10.4324/9780429311055-4

* Pentti J. K. KOURI: New York University, Helsinky University and NBER; Jorge Braga DE MACEDO: Princeton University and NBER; Albert J. VISCIO: New York University.

In this paper, we present a dynamic model which explains output, employment and energy consumption in the French manufacturing sector in terms of the expected and actual path of wage rates and energy prices in units of output. The model has two distinguishing features. First, the rate of capacity utilization is determined explicitly from profit-maximizing behavior and it is viewed as the crucial adjusting variable in the short run. Second, we assume complete lack of substitutability between capital, labor and energy inputs ex post. Aggregating over vintages, the model generates the observed decline in profitability and utilization of existing capacity. The results of the simulation are very encouraging, and a simultaneous estimation of the model under static expectations is rejected by the data.

Introduction

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In this paper, we present a dynamic model which explains output, employment and energy consumption in the French manufacturing sector in terms of the expected and actual path of wage rates and energy prices in units of output. The model has two distinguishing features: First, the rate of capacity utilization is determined explicitly from profit-maximizing behavior and it is viewed as the crucial adjusting variable in the short run. Second, we assume complete lack of substitutability between capital, labor and energy inputs ex post.

Accordingly, adjustment to changes in relative factor prices occurs only slowly over time, as the existing capital stock is replaced by new capital and by production techniques consistent with the new pattern of relative factor prices. The putty-clay structure of production implies that profitability o...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• PREFACE
• INTRODUCTION
• Inflation, employment and external constraints: An overview of the French economy during the seventies
• The real wage gap and employment
• Profitability, employment and structural adjustment in France
• Anticipations, recessions and policy; an intertemporal disequilibrium model
• The Franc and the French financial sector
• On the Franc
• Capital controls: some principles and the French experience
• The effects of economic structure and policy choices on macro-economic outcomes in ten industrial countries
• Fiscal and monetary policies under a flexible exchange-rate system
• ROUNDTABLE DISCUSSION
• The French financial system: mechanisms and questions of reform