In this paper we analyze the performance of the French economy in light of the labour market regulations that prevail in this country. We argue that, due to such regulation, the French economy is locked at a high unemployment trap with low labour mobility and low sectorial reallocation.

We study, in a model with unemployment, how labour market status affects the preferences for public spending, whether in the form of a public good or subsidies. We then derive the implications for the dynamics of government expenditures, under the hypothesis of majority voting.

In this paper, we argue that many of the rigidities that characterize European labour markets can be understood as the outcome of political influence by incumbent employees. We then empirically investigate the determinants of labour market institutions and show that the results are consistent...