Social protection in the face of climate change: targeting principles and financing mechanisms
Michael Carter and
Environment and Development Economics, 2018, vol. 23, issue 3, 369-389
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 â€˜asset smoothingâ€™ coping behavior of the vulnerable, on poverty. The analysis shows the long-term level and depth of poverty can be improved by incorporating â€˜vulnerability-targeted social protectionâ€™ 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.
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Working Paper: Social protection in the face of climate change: targeting principles and financing mechanisms (2015)
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