Effects of Economic Policies on Microeconomic Stability

Forthcoming in OECD Journal: Economic Studies

OECD Economics Department Working Papers, No. 1201

62 Pages Posted: 25 Aug 2015

See all articles by Boris Cournede

Boris Cournede

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

Paula Garda

Organization for Economic Co-Operation and Development (OECD)

Volker Ziemann

Organization for Economic Co-Operation and Development (OECD)

Date Written: April 1, 2015

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.

Keywords: reforms, micro data, economic growth, stability, household

JEL Classification: D12, D22, J08, O40

Suggested Citation

Cournede, Boris and Garda, Paula and Ziemann, Volker, Effects of Economic Policies on Microeconomic Stability (April 1, 2015). Forthcoming in OECD Journal: Economic Studies. Available at SSRN: https://ssrn.com/abstract=2650007 or http://dx.doi.org/10.2139/ssrn.2650007

Boris Cournede (Contact Author)

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

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
+33145249037 (Phone)

HOME PAGE: http://www.oecd.org/eco

Paula Garda

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

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Volker Ziemann

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

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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