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The effectiveness of economic policy and position in the cycle



Type:   Working paper
Titre:   The effectiveness of economic policy and position in the cycle : The case of tax reductions on overtime in France
Auteur(s):   Heyer, Eric (1967-...) - Observatoire français des conjonctures économiques (Auteur)
Date de publication:   2011-04
Éditeur:   OFCE
Collection:   Document de travail de l'OFCE  :  2011-09
Mots-clés:   [en] Macroeconometric model, economic cycle, NAIRU, Phillips curve, hysteresis
JEL:   C13,  C22,  E24,  E32,  J08
Résumé:   [en] The economic situation of all the major developed countries has changed significantly during the 2007-2010 period. Yet many economic policies have been kept in place. This is true in particular of a key measure in French government policy: tax reductions on overtime hours and their exemption from social charges. In this article we propose simulations of this scheme based on the economic context in which it is implemented. According to our simulations, this kind of measure is pro-cyclical and therefore poorly suited to the current situation of the French economy. Furthermore, even in the case of good conditions, the scheme would not be funded. Without financing, this measure would widen the deficit and would amount to a fiscal stimulus. Financing it through an increase in levies would radically change its nature.


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Version de l'éditeur wp2011-09.pdf 0,2 MB