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The effectiveness of economic policy and position in the cycle: The case of tax reductions on overtime in France

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  • Eric Heyer

    (Observatoire français des conjonctures économiques (OFCE))

Abstract

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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  • Eric Heyer, 2011. "The effectiveness of economic policy and position in the cycle: The case of tax reductions on overtime in France," Sciences Po publications 2011-09, Sciences Po.
    • Handle: RePEc:spo:wpmain:info:hdl:2441/5l6uh8ogmqildh09h561p0po1
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    Cited by:

    1. Gilles Le Garrec & Vincent Touzé, 2020. "Le multiplicateur d'investissement public," Working Papers hal-03370444, HAL.
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    3. Eric Heyer, 2011. "Faut-il revenir sur la défiscalisation des heures supplémentaires ? Simulation et première évaluation de ce dispositif," SciencePo Working papers Main hal-01024472, HAL.
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    More about this item

    Keywords

    Macroeconometric model; economic cycle; NAIRU; Phillips curve; hysteresis;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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