When can we expect there to be Ricardian neutrality? The example of France

In a country like France where the weight of public spending is far higher than in other euro-zone countries, we can expect there to be Ricardian neutrality, i.e. a reduction in public spending will lead to an increase in private spending and therefore have no impact on total demand or growth. Public spending on pensions is very high in France: a reduction in the generosity of the pension system would admittedly lead to a reduction in the tax burden, but it would lead households to save more if it results from a reduction in the level of pensions: the reduction in the tax burden would then finance savings and not private spending. On the contrary, if the reduction in the generosity of the pension system results from an increase in the retirement age, there will normally be Ricardian neutrality. Ricardian neutrality is also possible when a private service replac es a public service: if public spending on healthcare or education were to be reduced, the reduction in the tax burden would probably be used to finance an increase in private spending on healthcare or education. But France is not planning to reduce its spending on healthcare or education, whereas a reduction in public spending on pensions was considered as part of the pension reform initiated before the coronavirus crisis. All things considered, we should therefore expect a Ricardian neutrality effect only if the reduction in government spending on pensions is due to a higher retirement age.