Introduction

France has managed to deliver one of the fastest and smoothest European growth performances since 1950. Why that is so remains largely a matter of debate. Alternative explanations centre on catching-up (Carré et al, 1972; Dubois, 1985), on new personnel at the helm of the state (Sautter, 1982), and on the benefit from opening up to international trade (Adams, 1989). In revisiting French growth we exploit the advantage of hindsight, extending the period of observation to the 1980s and early 1990s, and explore some of the implications of the ‘new’ growth theory emphasizing aggregate increasing returns. This leads us to look at human capital accumulation and the role of institutions.

By 1958, France had not quite exploited all of its potential for catch-up. Its growth performance was impressive in the 1960s, but since 1973 it has undergone the same slowdown as most other European countries. In searching for explanations, like Carré et al. (1972) – the landmark work on French growth – we devote particular attention to industry-level data and emphasize the key role played by the state as part of its traditionally active industrial policies. Like Villa (1993), we note the important role of equipment age and vintage.

As we focus on institutions, we pay particular attention to income distribution and find that the large swings in the rate of investment are well correlated with the share of GDP allocated to profits. More than previous authors, perhaps, we find many footprints of distortionary policies, mainly in the distribution of saving for physical capital accumulation and in the education system for human capital accumulation.