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

Michael Carter and Sarah Janzen

No 7476, Policy Research Working Paper Series from The World Bank

Abstract: Climate risk is an important driver of long-term poverty dynamics, especially in rural regions. This paper builds a dynamic, multi-generation household model of consumption, accumulation, and risk management to draw out the full consequences of exposure to climate risk. The model incorporates the long-term impacts of consumption shortfalls, induced by the optimal ?asset smoothing? coping behavior of the vulnerable, on the human capital and long-term wellbeing of families. The analysis shows that the long-term level and depth of poverty can be improved by incorporating elements of ?vulnerability-targeted social protection? into a conventional system of social protection. The paper also explores the degree to which vulnerability-targeted social protection can be implemented through a subsidized insurance mechanism. The analysis shows that insurance-based vulnerability-targeted social protection dominates (in economic growth and poverty reduction measures) both in-kind transfer mechanisms and vulnerability-targeted protection paid for using a public budget. The relative gains brought about by this scheme of insurance-augmented social protection increase?at least for a while?under climate change scenarios. However, if climate change becomes too severe, then even this novel form of social protection loses its ability to stabilize the extent and depth of poverty.

Keywords: Debt Markets; Regional Economic Development; Rural Poverty Reduction; Climate Change Economics (search for similar items in EconPapers)
Date: 2015-11-05
New Economics Papers: this item is included in nep-env and nep-ias
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Journal Article: Social protection in the face of climate change: targeting principles and financing mechanisms (2018) Downloads
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