Labour market institutions and employment in France

The purpose of this paper is to use individual data to study how the minimum wage and the welfare system combine to affect employment in France. Using the 1997 Labour Force Survey, we decompose non‐employment of married women into three components: voluntary, classical (due to the minimum wage) and ‘other’ (a residual category). We find that the minimum wage explains close to 15% of non‐employment for these women and that the disincentive effects of some welfare policy measures may be large. Our approach also allows us to evaluate various labour and welfare policy experiments in their effects on participation and employment. Copyright © 2002 John Wiley & Sons, Ltd.