Social contribution reductions and tax credits From targeting to a gradual mainstreaming

2 Social contribution reductions and tax credits From targeting to a gradual mainstreaming 

As a further substantiation of the intrinsic limits of the welfare regime approach, alone or first within the continental cluster, France has embarked on this consistent structural transformation of its social protection both on the side of funding (the significant increase of the funding by tax and special new contributions to the state budget) and on the labour market side (reductions of social contributions for employers). This has resulted in a rather clear strategy to liberalise the system, mainly stressing the demand side of the labour market, and less importantly the supply-side and individual incentives. From the current evaluation studies, the 

107 On this, see Barbier and Fargion (2004). In this respect, the introduction of the CNE reinforces the Latin dimension of the reform of the labour market in the recent years (Barbier 2006b). 

The French case is difficult to compare in terms of the share of working-age people receiving benefits or tax credits because of its highly complex and institutional fragmentation. One of the reasons why it is not easy to calculate an equivalent especially to the Anglo-Saxon welfare caseloads is that the French system is a continental one, where the notion of a tax and benefit system does not really fit in. Moreover, in the French case, the overall picture is blurred because of the 

108 This feature clearly distinguishes countries in the continental cluster. Italy and France are closer on this dimension versus Germany. 

---