Long term growth

Antonin Bergeaud, Gilbert Cette and Remy Lecat

A large proportion of economic growth remains unexplained by labour and capital factors. When the quality of these factors and the diffusion of innovation are taken into account, the unexplained share is reduced by roughly half. We thus remain ignorant as to the sources of a significant share of growth.

In France, there has been a marked deterioration since the 1970s in the ability of young low-income households to get on to the property ladder. Aside from the problem of house prices and borrowing conditions, this can in part be attributed to demographic changes, notably an increase in single-parent families and in urban migration. Financial assistance, such as cash gifts or inheritance, is widening the gap between the poorest and wealthiest young households.

In 2017, French growth is expected to accelerate to around 1.6%. In addition to support from monetary policy, ambitious structural reforms are necessary to raise the current potential growth rate, which is only just below 1.25%. These reforms need to focus on education, vocational training, and labour and competition law.

By Rémy Lecat with Antonin Bergeaud and Gilbert Cette

Standard of living has slowed continuously over the past decades in most developed economies, mainly due to a productivity slowdown. Have we entered a period of secular stagnation? In fact, many countries still have a significant catch-up potential, even in Europe, but to achieve this catch-up, the implementation of structural reforms is required.