Dutch disease and France

T he French economy is now characterised by: Tight supply-side constraints in manufacturing industry (low cost competitiveness, insufficient production capacity); Demand stimulus (faster wage growth, rising fiscal deficit, falling oil prices). It is here that the Dutch disease comes into play: the rise in demand for services will lead to an increase in the price of services relative to industrial products and an increase in the production of services and not industrial products , which is constrained by supply (foreign trade in industrial products will deteriorate ) . T he increase in the relative price of services will speed up deindustrialisation - the key mechanism of the Dutch disease - by transferring production factors to services. D emand stimulus in a context of supply-side constraints in industry therefore eventually causes deindustrialisation to accelerate.