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.
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