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

33 Pages Posted: 20 Apr 2016

See all articles by Michael R. Carter

Michael R. Carter

University of Wisconsin - Madison - Department of Agricultural & Applied Economics

Sarah Janzen

Montana State University - Bozeman

Date Written: November 5, 2015

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: Economics and Institutions, Climate Change and Health, Climate Change and Environment, Science of Climate Change, Economic Conditions and Volatility, Public Sector Management and Reform, Non Governmental Organizations, Inequality, Social Protections & Assistance

Suggested Citation

Carter, Michael R. and Janzen, Sarah, Social Protection in the Face of Climate Change: Targeting Principles and Financing Mechanisms (November 5, 2015). World Bank Policy Research Working Paper No. 7476, Available at SSRN: https://ssrn.com/abstract=2688374

Michael R. Carter (Contact Author)

University of Wisconsin - Madison - Department of Agricultural & Applied Economics ( email )

427 Lorch St.
Madison, WI 53706-1503
United States
608-263-2478 (Phone)

Sarah Janzen

Montana State University - Bozeman ( email )

Bozeman, MT 59717-2920
United States

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