Publication:
How Can Safety Nets Contribute to Economic Growth?

Loading...
Thumbnail Image
Files in English
English PDF (279.66 KB)
2,370 downloads
English Text (73.34 KB)
224 downloads
Date
2013-05
ISSN
Published
2013-05
Author(s)
Alderman, Harold
Editor(s)
Abstract
The paper provides an up-to date and selective review of the literature on how social safety nets contribute to growth. The evidence is carefully chosen to show how safety nets have the potential to overcome constraints on growth linked to market failures, and is organized into 4 distinct pathways: i) encouraging asset accumulation by changing incentives and by addressing imperfections in financial markets caused by constraints in obtaining credit, and from information asymmetries; overcoming such failures helps households to invest into their human capital or productive assets; ii) failures in insurance markets especially in low income setting; safety nets are assisting in managing risk both ex post and ex ante; iii) safety nets are overcoming failure to create assets and other local economy complementary factors to household-level investments; iv) safety nets are shown to relax political constraints on policy. Safety nets have a dual objective of directly alleviating poverty through transfers to the poor and of triggering higher growth for the poor. However, the trade-off between the dual objectives of equity and growth is not eliminated by the potential for productive safety nets; this remains critical for designing social policies.
Link to Data Set
Citation
Alderman, Harold; Yemtsov, Ruslan. 2013. How Can Safety Nets Contribute to Economic Growth?. Policy Research Working Paper;No. 6437. © World Bank. http://hdl.handle.net/10986/15578 License: CC BY 3.0 IGO.
Associated content
Report Series
Report Series
Other publications in this report series
  • Publication
    The Future of Poverty
    (Washington, DC: World Bank, 2025-07-15) Fajardo-Gonzalez, Johanna; Nguyen, Minh C.; Corral, Paul
    Climate change is increasingly acknowledged as a critical issue with far-reaching socioeconomic implications that extend well beyond environmental concerns. Among the most pressing challenges is its impact on global poverty. This paper projects the potential impacts of unmitigated climate change on global poverty rates between 2023 and 2050. Building on a study that provided a detailed analysis of how temperature changes affect economic productivity, this paper integrates those findings with binned data from 217 countries, sourced from the World Bank’s Poverty and Inequality Platform. By simulating poverty rates and the number of poor under two climate change scenarios, the paper uncovers some alarming trends. One of the primary findings is that the number of people living in extreme poverty worldwide could be nearly doubled due to climate change. In all scenarios, Sub-Saharan Africa is projected to bear the brunt, contributing the largest number of poor people, with estimates ranging between 40.5 million and 73.5 million by 2050. Another significant finding is the disproportionate impact of inequality on poverty. Even small increases in inequality can lead to substantial rises in poverty levels. For instance, if every country’s Gini coefficient increases by just 1 percent between 2022 and 2050, an additional 8.8 million people could be pushed below the international poverty line by 2050. In a more extreme scenario, where every country’s Gini coefficient increases by 10 percent between 2022 and 2050, the number of people falling into poverty could rise by an additional 148.8 million relative to the baseline scenario. These findings underscore the urgent need for comprehensive climate policies that not only mitigate environmental impacts but also address socioeconomic vulnerabilities.
  • Publication
    Exports, Labor Markets, and the Environment
    (Washington, DC: World Bank, 2025-07-14) Góes, Carlos; Conceição, Otavio; Lara Ibarra, Gabriel; Lopez-Acevedo, Gladys
    What is the environmental impact of exports? Focusing on 2000–20, this paper combines customs, administrative, and census microdata to estimate employment elasticities with respect to exports. The findings show that municipalities that faced increased exports experienced faster growth in formal employment. The elasticities were 0.25 on impact, peaked at 0.4, and remained positive and significant even 10 years after the shock, pointing to a long and protracted labor market adjustment. In the long run, informal employment responds negatively to export shocks. Using a granular taxonomy for economic activities based on their environmental impact, the paper documents that environmentally risky activities have a larger share of employment than environmentally sustainable ones, and that the relationship between these activities and exports is nuanced. Over the short run, environmentally risky employment responds more strongly to exports relative to environmentally sustainable employment. However, over the long run, this pattern reverses, as the impact of exports on environmentally sustainable employment is more persistent.
  • Publication
    The Macroeconomic Implications of Climate Change Impacts and Adaptation Options
    (Washington, DC: World Bank, 2025-05-29) Abalo, Kodzovi; Boehlert, Brent; Bui, Thanh; Burns, Andrew; Castillo, Diego; Chewpreecha, Unnada; Haider, Alexander; Hallegatte, Stephane; Jooste, Charl; McIsaac, Florent; Ruberl, Heather; Smet, Kim; Strzepek, Ken
    Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.
  • Publication
    The Asymmetric Bank Distress Amplifier of Recessions
    (Washington, DC: World Bank, 2025-07-11) Kim, Dohan
    One defining feature of financial crises, evident in U.S. and international data, is asymmetric bank distress—concentrated losses on a subset of banks. This paper proposes a model in which shocks to borrowers’ productivity dispersion lead to asymmetric bank losses. The framework exhibits a “bank distress amplifier,” exacerbating economic downturns by causing costly bank failures and raising uncertainty about the solvency of banks, thereby pushing banks to deleverage. Quantitative analysis shows that the bank distress amplifier doubles investment decline and increases the spread by 2.5 times during the Great Recession compared to a standard financial accelerator model. The mechanism helps explain how a seemingly small shock can sometimes trigger a large crisis.
  • Publication
    Impact of Heat Waves on Learning Outcomes and the Role of Conditional Cash Transfers
    (Washington, DC: World Bank, 2025-07-14) Miranda, Juan José; Contreras, Cesar
    This paper evaluates the impact of higher temperatures on learning outcomes in Peru. The results suggest that 1 degree above 20°C is equivalent to 7 and 6 percent of a standard deviation of what a student learns in a year for math and reading tests, respectively. These results hold true when the main specification is changed, splitting the sample, collapsing the data at school level, and using other climate specifications. The paper aims to improve understanding of how to deal with the impacts of climate change on learning outcomes in developing countries. The evidence suggests that conditional cash transfer programs can mitigate the negative effects of higher temperatures on students’ learning outcomes in math and reading.
Journal
Journal Volume
Journal Issue

Related items

Showing items related by metadata.

  • Publication
    Examining Conditional Cash Transfer Programs : A Role for Increased Social Inclusion?
    (World Bank, Washington, DC, 2006-06) de la Brière, Bénédicte; Rawlings, Laura B.
    Conditional Cash Transfer programs (CCTs) provide money to poor families contingent upon certain verifiable actions, generally minimum investments in children s human capital such as regular school attendance or basic preventative health care. They therefore hold promise for addressing the inter-generational transmission of poverty and fostering social inclusion by explicitly targeting the poor, focusing on children, delivering transfers to women, and changing social accountability relationships between beneficiaries, service providers and governments. CCT programs are at the forefront of applying new social policy theories and program administration practices. They address demand-side barriers, have a synergistic focus on investments in health, education and nutrition, and combine short-term transfers for income support with incentives for long-run investments in human capital. They also are public sector leaders in program administration, using modern targeting, registering, and monitoring systems along with strategic evaluations. Their impact depends on the supply of quality, accessible health and education services and may increase with strengthened links to the labor market, and a greater focus on early childhood and transient support to households facing shocks. CCT programs are facing a number of challenges as they evolve, from reaching vulnerable groups to fostering transparency and accountability, especially at the community level. Centralized programs have been criticized for limiting the engagement of local governments and civil society and it is clear that in limited capacity environments, a greater reliance on communities is warranted. In sum, though promising, these programs are not a panacea against social exclusion and should form part of comprehensive social and economic policy strategies and be applied carefully in different policy contexts.
  • Publication
    Timor-Leste Social Assistance : Public Expenditure and Program Performance Report
    (Washington, DC, 2013-06-24) World Bank
    The Democratic Republic of Timor-Leste is a young, post-conflict nation endowed with significant oil revenues. Timor-Leste has one of the highest birth rates in the world (2.41 percent population growth) with over 44 percent of the population below 15 years of age (Timor-Leste Census, 2010). Since the 2006 crisis, the Government of Timor-Leste has shown a clear commitment to social assistance. Globally, poverty persistence is closely related to major life-cycle disadvantages resulting in low human capital outcomes, and yet large-scale poverty remains unaddressed by current social protection efforts. This expenditure review and performance evaluation report is part of the technical assistance provided to Timor-Leste's Ministry of Social Solidarity (MSS) in response to the lack of any national level evaluation of the safety nets system since its inception. To that end, this study seeks to assess the social assistance policy, as well as the performance of the main MSS social assistance programs. More specifically, the aims are to: (1) determine whether existing programs are efficient, effective and sufficient in addressing main vulnerabilities; (2) assess the adequacy and composition of the allocation of financial resources for delivery of government social assistance; (3) review operational and administrative issues; and (4) make recommendations for improving the delivery of social safety nets. Some of the questions that this report seeks to answer include: what are the main risks facing the vulnerable groups in Timor-Leste?; what types of programs are in place to address those risks?; is the range of programs and their financial allocations appropriate for the country's needs?; is the institutional arrangement adequate?; are these programs effective and reaching the intended beneficiaries?; and are they implemented cost-effectively? The report is organized as follows: chapter one gives context, purpose and conceptual framework. Chapter two describes the attributes of the poorest 40 percent and the main vulnerabilities and risks that low-income families in Timor-Leste face. Chapter three provides a historical overview of the social assistance policy and programs that emerged after the 2006-2007 conflict. A summary of levels and trends in aggregate public expenditure on safety nets, composition of spending as well as program-specific budget analysis is presented in chapter four. Chapter five assesses performance of the safety nets by analyzing coverage, targeting effectiveness, and generosity. Chapter six examines impact and targeting efficiency using simulation techniques. Chapter seven assesses implementation capacity, and business processes, and in particular, the following: ID systems, enrollment, payments arrangements and monitoring and evaluation. Chapter eight concludes with implications for social response and policy considerations.
  • Publication
    Bailing Out the World's Poorest
    (Washington, DC: World Bank, 2008-10) Ravallion, Martin
    While the 2008 financial crisis is global in nature, it is likely to have heterogeneous welfare impacts within the developing world, with some countries, and some people, more vulnerable than others. It also threatens to have lasting impacts for some of those affected, notably through the nutrition and schooling of children in poor families. These features point to the need for a differentiated social policy response, aiming to provide rapid income support to those in most need, while preserving the key physical and human assets of poor people and their communities. The paper points out some mistakes in past crisis responses and identifies key design features for safety net programs that can help compensate for the likely welfare losses in the short-term while also promoting longer-term recovery.
  • Publication
    Social Protection in Pakistan : Managing Household Risks and Vulnerability
    (Washington, DC, 2007-10-18) World Bank
    The report is the result of an inter-institutional collaborative effort between the Government of Pakistan, civil society, and international donors. This report finds that while Pakistan implements a wide array of social protection programs, the effectiveness of these programs could be significantly improved. The report finds that social protection programs in Pakistan face important constraints in terms of coverage, targeting, and implementation, and inability to respond to vulnerability, which will need to be overcome in order that they can more effectively protect the poor. The report suggests a two-pronged approach for social protection reform: (i) improving the ability of safety net programs to reach the poor, promote exit from poverty, and respond to natural disasters; coupled with (ii) a longer term approach for strengthening social security. Considering social protection as a system rather than a collection of different programs would allow the government to curtail fragmentation, improve the quality of social protection spending, and have higher impact. Given fiscal constraints, the report suggests that coverage expansion first exploits the opportunity for efficiency improvements in current programs, through better targeting and reduction in duplication and overlap. However, the decline in real spending on the two main safety net programs is worrisome. It is therefore welcome that the government is considering how best to ensure adequate yet fiscally affordable spending on safety nets as part of its draft social protection strategy.
  • Publication
    Liberia : A Diagnostic of Social Protection
    (World Bank, Washington, DC, 2011-12) Borgarello, Andrea; Figazzolo, Laura; Weedon, Emily
    Safety Nets are limited in Liberia and, although as a share of GDP, expenditures are higher than the regional average, the average benefit amount is equal to only 7-20 percent of the poverty line. The current system focuses on the country s most vulnerable populations but that the system is fragmented. Food insecurity is mainly addressed through food transfers aimed at preventing starvation and malnutrition. Unemployed people, including the large portion of the population engaged in informal employment, are targeted primarily by public works. Scaling-up Liberia s safety nets would require significant investments, which are not viable at the moment given the country s financial constraints. Efforts should hence focus on improving the overall safety net system within the existing budget.

Users also downloaded

Showing related downloaded files

  • Publication
    Lebanon Economic Monitor, Fall 2022
    (Washington, DC, 2022-11) World Bank
    The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.
  • Publication
    The Journey Ahead
    (Washington, DC: World Bank, 2024-10-31) Bossavie, Laurent; Garrote Sánchez, Daniel; Makovec, Mattia
    The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.
  • Publication
    Argentina Country Climate and Development Report
    (World Bank, Washington, DC, 2022-11) World Bank Group
    The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.
  • Publication
    Classroom Assessment to Support Foundational Literacy
    (Washington, DC: World Bank, 2025-03-21) Luna-Bazaldua, Diego; Levin, Victoria; Liberman, Julia; Gala, Priyal Mukesh
    This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.
  • Publication
    World Development Report 2006
    (Washington, DC, 2005) World Bank
    This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.