I meant to bring this up last week. Edward Prescott (Co-winner of the Nobel Prize) wrote a piece in The Wall Street Journal saying that low productivity and work hours in France are pretty much entirely due to their tax rates. Cultural and institutional differences have nothing to do with it. He writes:

Here’s a startling fact: Based on labor market statistics from the Organization for Economic Cooperation and Development, Americans aged 15-64, on a per-person basis, work 50% more than the French. Comparisons between Americans and Germans or Italians are similar. What’s going on here? What can possibly account for these large differences in labor supply? It turns out that the answer is not related to cultural differences or institutional factors like unemployment benefits, but that marginal tax rates explain virtually all of this difference. I admit that when I first conducted this analysis I was surprised by this finding, because I fully expected that institutional constraints are playing a bigger role. But this is not the case. (Citations and more complete data can be found in my paper, at www.minneapolisfed.org.)

Me:I’m always interested in new reasons to make fun of the French and their tax system will do just fine. But I just have a hard time buying it. I don’t have nearly the technical expertise to quibble with his statistical analysis. But it simply seems to me that a country which sends state goons to companies to make sure no one works overtime and which considers six weeks vacation slave-driving, has some additional anti-work policies in addition to lousy tax rates. Also, aren’t French tax rates themselves a product of cultural differences?