1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Social Safety Nets and Structural Adjustment

Social safety nets protect citizens against hardship. By offering compensation, social safety nets may help overcome the political resistance to trade liberalisation and structural reform, but they can also weaken the incentives to work and save. Depending on their design, safety nets may also ease or impair adjustment to changing economic circumstances. Against this backdrop, the paper looks at the impact of social safety nets on output and employment and on the ability of economies to absorb adverse shocks. Dependent on their design, the presence of extensive social safety nets is often associated with more limited labour resource use and lower per capita GDP levels, even though activation policy can provide offsets. Moreover, many of the characteristics of social safety nets that reduce output and employment levels heighten the persistence of slack in the wake of adverse shocks. By contrast, the impact of social safety nets on business investment and household saving, and by extension the current account balance, is not clear-cut.

English

Keywords: social safety net, economic convergence, economic resilience, structural policy
JEL: E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles; F42: International Economics / Macroeconomic Aspects of International Trade and Finance / International Policy Coordination and Transmission; O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; O57: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Comparative Studies of Countries; E24: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity; E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth; H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions
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