CRESTive Minds – Épisode 2 – Stéphane Auray

Researcher portrait: Stéphane Auray, professor at ENSAI, research associate at CREST.

What is your career path?
I completed my PhD at Toulouse School of Economics. Before joining Ensai and the CRESt, I was a Professor in Canada and then in the north of France, where I still hold a position.

What are your research topics?
I have been working on various topics like the economics of war, extreme events, monetary and fiscal policies, heterogenous agent models, labor economics, open economy, all topics being mostly in macroeconomics. I have also worked with my colleagues in the North of France on the definition of what could be an optimal network for the transportation of hydrogen.

Which economist has particularly inspired you and why?
I could have said Robert Lucas because he changed everything in macroeconomics. However, the economists who changed my life as a researcher are my advisor Patrick Fève, who gave me his passion for macroeconomics, and Paul Beaudry because of the speed with which he thinks about economics and because of the super high flow of ideas he might have.

Has the research of the eminent economist Daniel Cohen, who has just passed away, nourished or influenced your work?
Yes, his view about the persistent high unemployment dynamics since the 70’s and his analysis of the high productivity per hour worked in France convinced about the importance of working on the labor market mechanisms.

In one of your latest publications, you put education and the subject of “moonlighting”(undeclared work) into perspective- could you tell us more?
Well, in this paper we document three facts: (i) Higher educated workers are more likely to moonlight; (ii) conditional on education, workers with higher wages are less likely to moonlight; and (iii) the prevalence of moonlighting is declining over time for all education groups.
More importantly, as my son believes that I am a poet, since he looked at some of my codes, I wanted the title to look like the title of a poem.

In the article “Household Income, Liquidity, and Optimal Unemployment”, you and your co-authors demonstrate that workers have different levels of liquidity at their disposal to smooth their consumption during a period of unemployment. They either accept the system by paying into it, or they opt out. You explain that this decision gives rise to a several ground-breaking results with political implications.
Yes this is true. These results are very striking and might have very important consequences on the labor markets when we are in a recession and when the unemployment rate is high. The political implications are numerous, as one might want to make the unemployment benefits system depend on a households’ liquidity at their disposal with some thresholds. What would be done next would be to calculate the optimal liquidity amount to decide the UI benefits amount the unemployed may receive.

As an economist specializing in this field, what is your view of the current unemployment situation in France since the new unemployment insurance regulations came into force in February 2023?
Adjusting UI benefits depending on economic activity seems like a good idea, provided that this modulation varies from one sector to another, some being in tension when others are not.
And indeed, reforming unemployment insurance is essential: our system is suffering from too complicated rules, with levels of compensation sometimes lower than the RSA.
In addition, certain beneficiaries who do not work cope well by managing to accumulate different types of benefits or

In France, as in many other countries, household income is being swallowed up by the current inflation caused by COVID and the war in Ukraine.Today, faced with this global financial configuration, what economic policy could mitigate the consequences of this crisis, and is there a country that applies a particular economic model that has enabled it to be less impacted?
The only way to face this new crisis after the ones of 2007, 2011 and the coronavirus is to increase coordination between countries. Unfortunately, countries are less and less open to such coordination. The only way to get out of this crisis of high inflation, low unemployment rate and high employment rate is to accept a wage cut and a recession.

Recently, you’ve been working with Aurélien Eyquem on customs law, in what way is this an important economic and political issue?
Countries distort trade patterns (‘trade wars’) to gain strategic advantage relative to one another. At the same time, monetary policies are set independently and have spillover effects on partner countries (‘currency wars’). This is in line with your previous question as countries are more and more willing to adopt protectionist rulesthat are affected by monetary policies. When considering trade imbalances, we find that both inflation and tariffs depend critically upon the currency denomination of internationally traded bonds.

In your opinion, what impact will AI have on the economy and employment in the near future?
AI will displace employment just as employment moved to the service sector, this is only a question of the history of our modern societies.
It is certain that when we deal with more qualified jobs and not manual work, it is immediately frightening, but we should not be afraid of it.
This is good news even if the speed at which AI is spreading around the world can be scary.
A series of innovations in this world are there to occupy the time spent at leisure and this is, for example, the case of ChatGPT for the moment.
However, little by little, this will affect work and could generate productivity gains.