Hostname: page-component-cd9895bd7-hc48f Total loading time: 0 Render date: 2024-12-23T14:38:15.441Z Has data issue: false hasContentIssue false
  • English
  • Français

Social protection in the face of climate change: targeting principles and financing mechanisms

Published online by Cambridge University Press:  18 December 2017

Michael R. Carter  and
Sarah A. Janzen
Michael R. Carter
Affiliation:
Department of Agricultural and Resource Economics, University of California, Davis, USA
Sarah A. Janzen*
Affiliation:
Department of Agricultural Economics & Economics, Montana State University, P.O. Box 17920, Bozeman, MT 59717-2920, USA
*
*Corresponding author. E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper builds a multi-generation household model of consumption, accumulation, and risk management to assess the dynamic consequences of climate risk exposure. The model incorporates long-term impacts of consumption shortfalls, induced by optimal ‘asset smoothing’ coping behavior of the vulnerable, on poverty. The analysis shows the long-term level and depth of poverty can be improved by incorporating ‘vulnerability-targeted social protection’ into a conventional social protection system. The paper further shows insurance-based vulnerability-targeted social protection dominates (in economic growth and poverty reduction measures) both in-kind transfers and asset-based vulnerability-targeted protection. We then stress test social protection mechanisms and find the relative performance of insurance-based vulnerability-targeted social protection improves when subjected to current pessimistic projections about increasing drought risk. However, if drought risk increases beyond current climate change projections, then even the vulnerability-targeted policy loses its ability to stabilize the extent and depth of poverty.

Keywords

Climate changeinsurancepoverty dynamicsrisk and uncertaintysocial protection

JEL classification

Q54: Climate • Natural Disasters and Their Management • Global Warming H50: General G22: Insurance • Insurance Companies • Actuarial Studies I32: Measurement and Analysis of Poverty
Type
Research Article
Information
Environment and Development Economics , Volume 23 , Special Issue 3: Poverty and Climate Change , June 2018 , pp. 369 - 389
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alderman, H, Hoddinott, J and Kinsey, B (2006) Long term consequences of early childhood malnutrition. Oxford Economic Papers 58, 450–474.CrossRefGoogle Scholar
Barrett, CB and Carter, MR (2013) The economics of poverty traps and persistent poverty: policy and empirical implications. Journal of Development Studies 49, 976–990.CrossRefGoogle Scholar
Barrett, CB, Marenya, PP, McPeak, J, Minten, B, Place, F, Randrianarisoa, JC, Rasambainarivo, J and Wangila, J (2006) Welfare dynamics in rural Kenya and Madagascar. Journal of Development Studies 42, 248–277.Google Scholar
Bastagli, F, Hagen-Zanker, J, Harman, L, Barca, V, Sturge, G, Schmidt, T and Pellerano, L (2016) Cash transfers: what does the evidence say? A rigorous review of programme impact and of the role of design and implementation features. Working paper, Overseas Development Institute.Google Scholar
Berhane, G, Gilligan, DO, Hoddinott, J, Kumar, N and Taffesse, A (2014) Can social protection work in Africa? The impact of Ethiopia's productive safety net programme. Economic Development and Cultural Change 63, 1–26.CrossRefGoogle Scholar
Buera, FJ (2009) A dynamic model of entrepreneurship with borrowing constraints: theory and evidence. Annals of Finance 5, 443–464.Google Scholar
Cai, J, de Janvry, A and Sadoulet, E (2015) Social networks and the decision to insure. American Economic Journal: Applied Economics 7, 81–108.Google Scholar
Carter, MR and Ikegami, M (2009) Looking forward: theory-based measures of chronic poverty and vulnerability. In Addison, T, Hulme, D and Kanbur, R (Ed.), Poverty Dynamics: Interdisciplinary Perspectives. Oxford University Press, 128–153.Google Scholar
Carter, MR and Lybbert, TJ (2012) Consumption versus asset smoothing: testing the implications of poverty trap theory in Burkina Faso. Journal of Development Economics 99, 255–264.Google Scholar
Carter, MR, Little, PD, Mogues, T and Negatu, W (2007) Poverty traps and natural disasters in Ethiopia and Honduras. World Development 35, 835–856.CrossRefGoogle Scholar
Carter, MR, de Janvry, A, Sadoulet, E and Sarris, A (2017) Index insurance for developing country agriculture: a reassessment. Annual Review of Resource Economics 9, 421–438.Google Scholar
Chantarat, S, Mude, AG, Barrett, CB and Carter, MR (2013) Designing index based livestock insurance for managing asset risk in Northern Kenya. Journal of Risk and Insurance 80, 205–237.Google Scholar
Cole, S, Gine, X, Tobacman, J, Townsend, R, Topalova, P and Vickery, J (2013) Barriers to household risk management: evidence from India. American Economic Journal: Applied Economics 5, 104–135.Google Scholar
Colecraft, E, Marquis, GS, Aryeetey, R, Sakyi-Dawson, O, Lartey, A, Ahunu, B, Canacoo, E, Butler, LM, Reddy, MB, Jensen, HH and Huff-Lonergan, E (2006) Constraints on the use of animal source foods for young children in Ghana: a participatory rapid appraisal approach. Ecology of Food and Nutrition 45, 351–377.Google Scholar
Deaton, A (1991) Saving and liquidity constraints. Econometrica 59, 1221–1248.Google Scholar
Dercon, S, Hill, RV, Clarke, D, Outes-Leon, I and Taffesse, A (2014) Offering rainfall insurance to informal insurance groups: evidence from a field experiment in Ethiopia. Journal of Development Economics 106, 132–143.Google Scholar
Dupas, P (2011) Health behavior in developing countries. Annual Review of Economics 3, 425–449.Google Scholar
Gertler, P, Martinez, SW and Rubio-Codina, M (2012) Investing cash transfers to raise long-term living standards. American Economic Journal: Applied Economics 4, 164–192.Google Scholar
Gine, X, Townsend, R and Vickery, J (2008) Patterns of rainfall insurance participation in Rural India. World Bank Economic Review 22, 539–566.CrossRefGoogle Scholar
Hoddinott, J (2006) Shocks and their consequences across and within households in Rural Zimbabwe. Journal of Development Studies 42, 301–321.Google Scholar
IFAD (2011) Weather index-based insurance in agricultural development. Working paper, International Fund for Agricultural Development and World Food Programme.Google Scholar
Ikegami, M, Barrett, CB, Carter, MR and Janzen, SA (2018) Poverty traps and the social protection paradox, In Barrett, C, Carter, M and Chaves, J (Ed.), The Economics of Poverty Traps. University of Chicago Press and NBER.Google Scholar
Jacoby, HG and Skoufias, E (1997) Risk, financial markets, and human capital in a developing country. The Review of Economic Studies 64, 311–335.Google Scholar
Jalan, J and Ravallion, M (1999) Are the poor less well insured? Evidence on vulnerability to income risk in rural China. Journal of Development Economics 58, 61–81.CrossRefGoogle Scholar
Janzen, SA and Carter, MR (2013) After the drought: the impact of microinsurance on consumption smoothing and asset protection. NBER Working Paper.Google Scholar
Janzen, SA, Carter, MR and Ikegami, M (2017) Insurance markets, poverty dynamics and the cost of social protection in developing countries. Unpublished manuscript, Montana State University.Google Scholar
Jensen, ND, Mude, AG and Barrett, CB (2017) How basis risk and spatiotemporal adverse selection influence demand for index insurance: evidence from Northern Kenya. Unpublished manuscript, International Livestock Research Institute.CrossRefGoogle Scholar
Kazianga, H and Udry, C (2006) Consumption smoothing? Livestock, insurance and drought in rural Burkina Faso. Journal of Development Economics 79, 413–446.Google Scholar
Kolsteren, P, Lefèvre, P and Paule, M (1997) Nutrition rehabilitation and the importance of the perception of malnutrition in the follow-up of rehabilitated children. Asia Pacific Journal of Clinical Nutrition 6, 106–110.Google ScholarPubMed
Lybbert, TJ, Barrett, CB, Desta, S and Layne Coppock, D (2004) Stochastic wealth dynamics and risk management among a poor population. The Economic Journal 114, 750–777.CrossRefGoogle Scholar
Martorell, R (1999) The nature of child malnutrition and its long-term implications. Food & Nutrition Bulletin 20, 288–292.CrossRefGoogle Scholar
McIntosh, C, Sarris, A and Papadopoulos, F (2013) Productivity, credit, risk and the demand for weather index insurance in smallholder agriculture in Ethiopia. Agricultural Economics 44, 399–417.Google Scholar
McPeak, J and Barrett, CB (2001) Differential risk exposure and stochastic poverty traps among East African pastoralists. American Journal of Agricultural Economics 83, 674–679.Google Scholar
Miranda, M and Farrin, K (2012) Index insurance for developing countries. Applied Economic Perspectives and Policy 34, 391–427.Google Scholar
Mobarak, AM and Rosenzweig, M (2012) Selling formal insurance to the informally insured. Working Paper No. 97, Yale University, Department of Economics, February.Google Scholar
Patt, A, Suarez, P and Hess, U (2010) How do small-holder farmers understand insurance, and how much do they want it? Evidence from Africa. Global Environmental Change 20, 153–161.Google Scholar
Prudhomme, C, Giuntoli, I, Robinson, EL, Clark, DB, Arnell, NW, Dankers, R, Fekete, BM, Franssen, W, Gerten, D, Gosling, SN, Hagemann, S, Hannah, DM, Kim, H, Masaki, Y, Satoh, Y, Stacke, T, Wada, Y and Wisser, D (2014) Hydrological droughts in the 21st century, hotspots and uncertainties from a global multimodel ensemble experiment. Proceedings of the National Academy of Sciences 111, 3262–3267.CrossRefGoogle ScholarPubMed
Santos, P and Barrett, CB (2011) Persistent poverty and informal credit. Journal of Development Economics 96, 337–347.Google Scholar
Sauerborn, R, Berman, P and Nougtara, A (1996) Age bias, but no gender bias, in the intrahousehold resource allocation for helath care in rural Burkina Faso. Health Transition Review 6, 131–145.Google Scholar
Soares, FV, Ribas, RP and Hirata, GI (2010) Impact evaluation of a rural conditional cash transfer programme on outcomes beyond health and education. Journal of Development Effectiveness 2, 138–157.Google Scholar
Townsend, RM (1994) Risk and insurance in village India. Econometrica 62, 539–591.Google Scholar
Winsemius, HC, Jongman, B, Veldkamp, TI, Hallegatte, S, Bangalore, M and Ward, PJ (2015) Disaster Risk, Climate Change, and Poverty: Assessing the Global Exposure of Poor People to Floods and Droughts. World Bank. Policy Research working paper; no WPS 7480. Washington, D.C.: World Bank Group.CrossRefGoogle Scholar
Zimmerman, FJ and Carter, MR (2003) Asset smoothing, consumption smoothing and the reproduction of inequality under risk and subsistence constraints. Journal of Development Economics 71, 233–260.Google Scholar
Supplementary material: PDF

Carter and Janzen supplementary material 1

Online Appendix

Download Carter and Janzen supplementary material 1(PDF)
PDF 990.1 KB