CNP | The new shapes of French productivity. Spread of innovation, aging, and rearmament

Read the introduction and summary

Since the health crisis, the debate on French productivity has often been dominated by the observation of an unprecedented decline in productivity. In light of significant statistical revisions, however, the latest available data call for a more nuanced assessment: the cumulative loss in productivity appears less severe than initially estimated, even though the return to pre-crisis trend remains incomplete. In terms of competitiveness, France has benefited from an undeniable relative improvement in its price competitiveness, particularly vis-à-vis Germany, but this improvement remains fragile: it is not sufficient to sustainably restore market share and must be consolidated through gains in productivity, innovation, and non-price competitiveness. Finally, the rapid advancement of artificial intelligence—particularly generative AI—places the diffusion of these technologies at the heart of growth challenges.

But how can we strengthen the French economy’s ability to adapt to major demographic, technological, and geopolitical transformations? How can we

maintain rising living standards in an economy where technology advances faster than its adoption, where labor is becoming scarcer, and where geopolitical constraints are redirecting investment?

After assessing overall performance, the report is structured around these three sections. Chapter 1 examines the mechanisms of technological diffusion and the determinants of firms’ productivity trajectories. Chapter 2 analyzes the consequences of demographic aging on economic growth and productivity. Finally, Chapter 3 examines the economic implications of rising defense spending, exploring the conditions under which such spending can support innovation, productivity, and long-term growth. Three key lessons can be drawn from these analyses. First, it is not the creation of innovations at the technological frontier that constitutes the main obstacle to French productivity growth, but rather their insufficient diffusion throughout the rest of the productive sector. In France, the highest-performing firms continue to innovate and improve their productivity. However, the diffusion of these innovations remains insufficient to have their full effect on aggregate productivity. Many firms still struggle to benefit from the innovations and best practices developed by the top-performing firms. Future productivity gains will depend as much on the diffusion of innovations throughout the entire productive sector as on their creation at the technological frontier.

Second, with a persistent slowdown in labor-force growth, French economic growth will no longer be able to rely primarily on an increase in the number of workers. Productivity gains will once again become the main driver of improvements in living standards. A significant portion of the growth over the past two decades has been driven by employment growth, but this trend will be increasingly constrained by an aging population. Our analysis highlights that the challenge is not merely demographic: it lies in adapting the labor market to this new reality so that an aging population does not place a lasting burden on productive performance. This entails, in particular, making longer working lives sustainable, preserving workers’ employability, and fostering a better match between skills, career paths, and the needs of businesses.

Finally, the economic impact of rearmament will depend less on the amount of spending than on its ability to stimulate innovation, dual-use R&D, and the industrialization of new technologies. The effects of the scaling-up and acceleration of military spending on productivity cannot be assessed based solely on its volume: they

will depend above all on how this effort contributes to industrial and technological sovereignty and to the diffusion of innovations throughout the economy, provided that the composition of this spending strengthens these capabilities on a lasting basis.

Three conclusions emerge from the report, along with associated recommendations:

• Future growth will depend more on the diffusion of innovations than on their invention alone.
• In an aging society, productivity gains will become the key driver for maintaining and improving living standards.
• European rearmament will only serve as a driver of sustainable growth if it strengthens the economy’s innovation and production capabilities.