Social Protection in the Face of Climate Change: Targeting Principles and Financing Mechanisms

• Development Workshop

Date and Location

Monday, June 1, 2015, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

It has long been recognized that climatic risk is an important driver of long-term poverty dynamics, especially in rural regions. We build a dynamic household model of consumption, accumulation and risk management that allows us to draw out the full consequences of exposure to this risk (or vulnerability) by incorporating 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 well-being of families. We show that the long-term level and depth of poverty can be improved by incorporating elements of “Vulnerability-targeted Contingent Social Protection” into a national system of social protection. Such a novel element, if publicly funded, implies less budget for other elements of social protection. In an effort to mediate this implied tradeoff, we then explore the degree to which vulnerable, but not destitute beneficiaries may be able to at least partially foot the bill for Vulnerability-targeted Contingent Social Protection. We find that such individuals face severe liquidity constraints and hence are unlikely to pay the full cost of such protection. However a partial subsidy scheme appears quite promising, and would relax the tradeoffs between the competing elements of a social protection system. Finally, in work still to be completed, we will explore how the relative desirability of Vulnerability-targeted and conventional social protection change as the severity of risk increases.