Social Safety Nets and Structural Adjustment

Posted: 1 Jun 2010

See all articles by Paul Joseph Van Den Noord

Paul Joseph Van Den Noord

affiliation not provided to SSRN

Nathalie Girouard

affiliation not provided to SSRN

Christophe Andre

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: September 27, 2006

Abstract

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.

Keywords: social safety nets, economic convergence, economic resilience, structural policy

JEL Classification: E21, E24, E32, O47, F42, O57, H55

Suggested Citation

Van Den Noord, Paul Joseph and Girouard, Nathalie and Andre, Christophe, Social Safety Nets and Structural Adjustment (September 27, 2006). Available at SSRN: https://ssrn.com/abstract=1618219

Paul Joseph Van Den Noord

affiliation not provided to SSRN ( email )

Nathalie Girouard

affiliation not provided to SSRN ( email )

Christophe Andre (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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