What the French and British economies can learn from each other

1. What the French and British economies can learn from each other Howard Davies, Director The London School of Economics British Embassy, Paris. 13 October 2005

2. Evolution du PIB/tête à prix courant (en milliers de Dollars US) de 1980 à 2002 Source: OCDE, dernières données disponsibles 2002

3. Evolution des taux d’emploi et PIB/tête en France et au Royaume-Uni depuis 30 ans

4. Employment statistics for France & UK Source: Eurostat 2003

5. Quantitativement – Des emplois répartis sur tout le spectre de la population active Source: Eurostat 2003

6. Relativiser l’instabilité de l’emploi au Royaume-Uni Source: Eurostat 2003

7. Changes in wage differentials, early 80s to late 90s Source: Inequality and the Sate, John Hills, CASE, LSE

8. Gains from tax/benefit changes (UK): 2004-05 versus price-linked 97 system Source: Sutherland 2004

9. Share of the top 1% in income of top 10% Source: Atkinson 2003, quoted in John Hills, Inequality and the State

10. 0 20 40 60 80 100 USA Japan Northern Ireland Canada Sweden West Germany Great Britain Austria France Spain East Germany Portugal % agreeing that the gap between the rich and poor is too large Source: ISSP, quoted in John Hills, Inequality and the State

11. Why do people live in need? Sources: BSA survey; Eurobarometer

12. Current Account Balance of Payments 1999-2003 (% of GDP) Source: OECD Factbook, 2005

13. The Macroeconomic picture on productivity - Relative total factor productivity (US indexed to 100) Source: O’Mahoney and De Boer, 2002

14. Management practice scores across countries Management practice alone can account for 10-15% of the U.S. – U.K. productivity gap Source: Corporate assessment interviews; McKinsey/LSE analysis

15. Management practice assessment scores show greater intra-country variation than inter-country variation(% of companies, by management practice score) U.S: Average = 3.39 Germany: Average = 3.2 France: Average = 3.13 U.K: Average = 3.07

16. Consistency with selection and vintage effects when split by competition • Implications • Higher competition tends to eliminate poorer managed firms so average management scores are higher • Younger firms appear to be deploying better Management practices Corporate assessment interviews; McKinsey/CEP analysis

17. Negative effects of labour regulations Index of firing and dismissal costs (Botero et al 2005) • Regulatory “bite” significantly higher when manager has been in the job for a long time • Implies regulations may enable workers and managers to block change • Older workers and managers dislike change • Heavy firing costs may provide them with the security to oppose change

18. Trends in cohort size and the number of students passing the baccalauréat exam The size of the chort for year t corresponds to the number of people born at t minus 19 (19 is median age of candidates). The two series are normalised to 1 in 1945. Sources: French ministry of Education and French statistical office

19. The net effects of birth cohort on the probability of having at least a university diploma and on the probability of being in an upper-level white-collar position Sources: French ministry of education and the French Statistical Office