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Home Publications Blogs Beat the Press Growth and Inequality: The United States and France

Growth and Inequality: The United States and France

Sunday, 09 March 2014 11:19

Paul Krugman takes up the new paper from the IMF showing that redistributive measures do not appear to negatively impact growth. He offers a qualified maybe, noting that growth in the U.S. has outpaced growth in France in the last three decades. Krugman correctly points out that most of the gap is due to differences in hours worked, which he attributes to regulations in France. This one is probably worth a few more sentences.

In the United States, hours worked have been inflated by the fact that for many people the only way to get affordable health care insurance was to work at full-time job. There are millions of people who will likely opt to retire or work fewer hours now that they have the option of getting affordable health care insurance on the exchanges. Hours worked are always determined in part by regulations and social conventions. No one keeps the factory open an extra hour for the individual worker who wants to put in overtime. The rules and conventions in France tend to push toward less work, in the U.S. toward more work. Economists do not have a basis for saying that one is preferable to the other.

In terms of productivity (output per hour of work), Krugman points out that France is very close to the United States. (France looks a bit worse in more recent data, with productivity in 2012 at 92.8 percent of the U.S. level.) However there is another factor worth mentioning in this context. The United States is the world champion in greenhouse emissions per capita. While we have a bit less than five times the population of France we have over 16 times the carbon emissions. In effect we are imposing a cost on the rest of the world to maintain our standard of living.

Arguably, we should treat this differential cost as a negative that should be subtracted from GDP. In GDP, the gap between our CO2 output and what it would be if we had France's per capita levels was 3,703 million tons. At a price of $50 a ton this would imply a reduction in U.S. GDP of 1 percent, closing roughly 15 percent of the gap in productivity. At $100 a ton the implied reduction in output is over 2 percent of GDP closing almost 30 percent of the gap in productivity.

In short, while the gap in productivity between the United States and France is small by any measure, a more comprehensive accounting makes it even smaller. 

Comments (10)Add Comment
written by djb, March 09, 2014 1:00

gdp = income is largely composed of consumption

so a question to be asked is what is being consumed??

is everything being consumed enhancing quality of life??

and what about the activities that people are involved in that don't officially involve payment with money??

but these activities a consumed in a persons life experience

should they be considered part of the economy??

should they have a cash value assigned??

the idea that the us is producing so much more needs these questions asked about what is being produce
The moon belongs to everyone...
written by Sandwichman, March 09, 2014 1:07
We want more jobs -- that is to say more hours of work --but we want less greenhouse gas emissions. We face not only a paradox but a dilemma. The horns of this dilemma are yoked together, not just "in principle" but in the physical, mechanical agent of both the economy of fuel and the economy of labor: the machine.

"When we try to pick out anything by itself, we find it hitched to everything else in the Universe." John Muir, My First Summer in the Sierra.

There were 6.7 billion tons of GHGs emitted in the U.S. in 2011 and 225.6 billion hours worked. That same year the adult population in the U.S. was about 240 million. Suppose that the government adopted a target of cutting emissions by two-thirds by the year 2040. To do so would require a 3.7% annual reduction in greenhouse gas emissions.

The best greenhouse gas reduction on record (apart from economic fluctuations) in the period 1990 to 2011 was a little less than 2.5%. The average annual reduction was about 0.5%. Taking an average of the two gives a 1.5% reduction as something that is technologically feasible but ambitious. What if we made up the balance by cutting hours? To get from a 1.5% reduction to a 3.7% reduction would then require a reduction in aggregate hours of work of 2.2%.

written by PeonInChief, March 09, 2014 1:24
I assume that everyone has seen this commercial. I thought it was a joke the first time: http://www.youtube.com/watch?v=o4wNMOapzyw
written by urban legend, March 09, 2014 2:34
First, isn't per capita a terrible way to look at almost anything given the maldistribution we have?

Second, how much of our GDP, and labor input for that matter, has been devoted to war and the goods of war? The French work less. You can see it in the numbers. The French make love, not war.
written by John, March 09, 2014 2:56
You mean the national champion in green house emissions is China. No matter what the USA or anyone else does China will continue to erect new coal fired plants at a rapid clip to produce ever more CO2 into the atmosphere -- more than any nation.
And ingoring finance?
written by Dave, March 09, 2014 3:35
I wonder if finance adds a bit of hot air to the US prodictivity numbers. Also, I believethe US uses chinese workers more then France, so this also inflates prodictivity.
Different energy sources
written by AndrewDover, March 09, 2014 3:59
74% of France's electricity output is nuclear versus 20% for the US.

Obamacare to the Rescue
written by Ellis, March 10, 2014 12:08
Dean Baker continues to have illusions in Obamacare, and how it will supposedly benefit workers. That just ain't so. Even the unions are saying it. According to a new report by UNITEHERE, called "The Irony of Obamacare: Making Inequality Worse," workers are getting screwed, and the insurance companies are laughing all the way to the bank. When are liberals going to wake up?
What is work
written by Floccina, March 10, 2014 2:24
The French work less in the taxed economy that does not mean that they work less. They may do more of their own gardening, plumbing, child care, cooking etc. There is evidence that they do.
Nuke 'em Dano, murder one.
written by Mike Ballard, March 10, 2014 6:51
Chinese rulers are presently planning the construction of 200 new nuclear power plants for their PRC. They also see a lot of commercial potential in selling solar and wind power to the rest of the world.

Shorter work time is the key to more freedom and well-being. But who needs freedom when you've got wage-slavery and maybe a Cadillac in your future.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.