OECD Economic Policy Papers

The OECD Economic Policy Papers series is designed to make available selected studies on structural and macro-economic policy issues of current interest. The Papers are produced in the context of the work carried out on the two regular OECD titles, OECD Economic Outlook and Going for Growth.


Effects of Pro-Growth Policies on the Economic Stability of Firms, Workers and Households

Economic policies shape how much people earn but also how stable their income and jobs are. The level of earnings and the degree of economic stability both matter for well-being. Micro-level data indicate that, across OECD countries, economic instability is much greater at the level of individuals than at the aggregate level. The present study investigates the effects on micro-level stability of policies that boost growth. Movement from less to more productive processes and firms is at the heart of economic growth, which suggests possible trade-offs between growth and micro-level stability. The analysis indeed finds policy changes that boost growth but increase micro-level instability: reducing the progressivity or size of social transfers (including unemployment benefits) as well as moving from very to moderately tight restrictions on the competition for goods and services and on the dismissal of regular workers. However, the analysis also uncovers that moving to highly competitive policies generally reduces micro-level instability.


Keywords: household, stability, micro data, economic growth, reform
JEL: D12: Microeconomics / Household Behavior and Family Economics / Consumer Economics: Empirical Analysis; O40: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Economic Growth and Aggregate Productivity: General; J08: Labor and Demographic Economics / General / Labor Economics Policies; D22: Microeconomics / Production and Organizations / Firm Behavior: Empirical Analysis
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