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Effects of Economic Policies on Microeconomic Stability

Author

Listed:
  • Boris Cournède

    (OECD)

  • Paula Garda

    (OECD)

  • Volker Ziemann

    (OECD)

Abstract

Economic policies shape how much people earn as well as how stable their income and jobs are. The level and stability of earnings both matter for well-being. Standard economic aggregates do not measure accurately the economic uncertainty which households are facing. This paper shows that household-level economic instability is only very loosely related to macroeconomic volatility. It uses several household-level databases to document how pro-growth reforms influence household-level economic stability. Movement from less to more productive processes and firms is at the heart of economic growth, which suggests a trade-off between growth and micro-level stability. Certain policy changes boost growth but increase micro-level instability: they include reductions in tax progressivity or social transfers (including unemployment benefits) as well as moves from very to moderately tight restrictions on the flow of 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. Effets des politiques économiques sur la stabilité microéconomique Les politiques économiques façonnent les revenus mais aussi leur stabilité ainsi que celle des emplois. De fait, le niveau comme la stabilité des revenus tous deux influencent sur le bien-être. Cependant, les agrégats économiques traditionnels ne mesurent pas l’incertitude économique à laquelle les ménages sont effectivement confrontés. Cette étude montre que l’instabilité économique vécue par les ménages n’entretient que des liens très distendus avec la volatilité macroéconomique. Elle utilise plusieurs bases de micro-données collectées au niveau des ménages pour documenter la manière dont les réformes encourageant la croissance influencent la stabilité économique des ménages. Le mouvement vers des processus et des entreprises de plus en plus productifs se situe au coeur de la dynamique de croissance économique : cette observation suggère qu’une tension peut s’établir entre croissance et stabilité micro-économique. Certains ajustements des politiques publiques augmentent la croissance, mais au prix d’une plus grande instabilité micro-économique : il s’agit des réformes qui rendent la fiscalité ou les transferts sociaux (y compris les indemnités de chômage) moins progressifs ainsi que des mesures qui remplacent de fortes restrictions sur la concurrence ou sur les licenciements de travailleurs permanents par des restrictions de niveau intermédiaire. Néanmoins, l’analyse fait aussi apparaître que, lorsque les réformes dans ces domaines sont plus appuyées et conduisent à un niveau élevé de concurrence, elles réduisent le plus souvent l’instabilité micro-économique.

Suggested Citation

  • Boris Cournède & Paula Garda & Volker Ziemann, 2015. "Effects of Economic Policies on Microeconomic Stability," OECD Economics Department Working Papers 1201, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1201-en
    DOI: 10.1787/5js3f5cwj3jb-en
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    References listed on IDEAS

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    More about this item

    Keywords

    croissance économique; economic growth; household; micro data; micro-données; ménages; reforms; stability; stabilité;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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