Skip to main content

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

  • Michael R. Carter (a1) and Sarah A. Janzen (a2)

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 ‘asset smoothing’ coping behavior of the vulnerable, on poverty. The analysis shows the long-term level and depth of poverty can be improved by incorporating ‘vulnerability-targeted social protection’ 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.

Corresponding author
*Corresponding author. E-mail:
Hide All
Alderman, H, Hoddinott, J and Kinsey, B (2006) Long term consequences of early childhood malnutrition. Oxford Economic Papers 58, 450474.
Barrett, CB and Carter, MR (2013) The economics of poverty traps and persistent poverty: policy and empirical implications. Journal of Development Studies 49, 976990.
Barrett, CB, Marenya, PP, McPeak, J, Minten, B, Place, F, Randrianarisoa, JC, Rasambainarivo, J and Wangila, J (2006) Welfare dynamics in rural Kenya and Madagascar. Journal of Development Studies 42, 248277.
Bastagli, F, Hagen-Zanker, J, Harman, L, Barca, V, Sturge, G, Schmidt, T and Pellerano, L (2016) Cash transfers: what does the evidence say? A rigorous review of programme impact and of the role of design and implementation features. Working paper, Overseas Development Institute.
Berhane, G, Gilligan, DO, Hoddinott, J, Kumar, N and Taffesse, A (2014) Can social protection work in Africa? The impact of Ethiopia's productive safety net programme. Economic Development and Cultural Change 63, 126.
Buera, FJ (2009) A dynamic model of entrepreneurship with borrowing constraints: theory and evidence. Annals of Finance 5, 443464.
Cai, J, de Janvry, A and Sadoulet, E (2015) Social networks and the decision to insure. American Economic Journal: Applied Economics 7, 81108.
Carter, MR and Ikegami, M (2009) Looking forward: theory-based measures of chronic poverty and vulnerability. In Addison, T, Hulme, D and Kanbur, R (Ed.), Poverty Dynamics: Interdisciplinary Perspectives. Oxford University Press, 128153.
Carter, MR and Lybbert, TJ (2012) Consumption versus asset smoothing: testing the implications of poverty trap theory in Burkina Faso. Journal of Development Economics 99, 255264.
Carter, MR, Little, PD, Mogues, T and Negatu, W (2007) Poverty traps and natural disasters in Ethiopia and Honduras. World Development 35, 835856.
Carter, MR, de Janvry, A, Sadoulet, E and Sarris, A (2017) Index insurance for developing country agriculture: a reassessment. Annual Review of Resource Economics 9, 421438.
Chantarat, S, Mude, AG, Barrett, CB and Carter, MR (2013) Designing index based livestock insurance for managing asset risk in Northern Kenya. Journal of Risk and Insurance 80, 205237.
Cole, S, Gine, X, Tobacman, J, Townsend, R, Topalova, P and Vickery, J (2013) Barriers to household risk management: evidence from India. American Economic Journal: Applied Economics 5, 104135.
Colecraft, E, Marquis, GS, Aryeetey, R, Sakyi-Dawson, O, Lartey, A, Ahunu, B, Canacoo, E, Butler, LM, Reddy, MB, Jensen, HH and Huff-Lonergan, E (2006) Constraints on the use of animal source foods for young children in Ghana: a participatory rapid appraisal approach. Ecology of Food and Nutrition 45, 351377.
Deaton, A (1991) Saving and liquidity constraints. Econometrica 59, 12211248.
Dercon, S, Hill, RV, Clarke, D, Outes-Leon, I and Taffesse, A (2014) Offering rainfall insurance to informal insurance groups: evidence from a field experiment in Ethiopia. Journal of Development Economics 106, 132143.
Dupas, P (2011) Health behavior in developing countries. Annual Review of Economics 3, 425449.
Gertler, P, Martinez, SW and Rubio-Codina, M (2012) Investing cash transfers to raise long-term living standards. American Economic Journal: Applied Economics 4, 164192.
Gine, X, Townsend, R and Vickery, J (2008) Patterns of rainfall insurance participation in Rural India. World Bank Economic Review 22, 539566.
Hoddinott, J (2006) Shocks and their consequences across and within households in Rural Zimbabwe. Journal of Development Studies 42, 301321.
IFAD (2011) Weather index-based insurance in agricultural development. Working paper, International Fund for Agricultural Development and World Food Programme.
Ikegami, M, Barrett, CB, Carter, MR and Janzen, SA (2018) Poverty traps and the social protection paradox, In Barrett, C, Carter, M and Chaves, J (Ed.), The Economics of Poverty Traps. University of Chicago Press and NBER.
Jacoby, HG and Skoufias, E (1997) Risk, financial markets, and human capital in a developing country. The Review of Economic Studies 64, 311335.
Jalan, J and Ravallion, M (1999) Are the poor less well insured? Evidence on vulnerability to income risk in rural China. Journal of Development Economics 58, 6181.
Janzen, SA and Carter, MR (2013) After the drought: the impact of microinsurance on consumption smoothing and asset protection. NBER Working Paper.
Janzen, SA, Carter, MR and Ikegami, M (2017) Insurance markets, poverty dynamics and the cost of social protection in developing countries. Unpublished manuscript, Montana State University.
Jensen, ND, Mude, AG and Barrett, CB (2017) How basis risk and spatiotemporal adverse selection influence demand for index insurance: evidence from Northern Kenya. Unpublished manuscript, International Livestock Research Institute.
Kazianga, H and Udry, C (2006) Consumption smoothing? Livestock, insurance and drought in rural Burkina Faso. Journal of Development Economics 79, 413446.
Kolsteren, P, Lefèvre, P and Paule, M (1997) Nutrition rehabilitation and the importance of the perception of malnutrition in the follow-up of rehabilitated children. Asia Pacific Journal of Clinical Nutrition 6, 106110.
Lybbert, TJ, Barrett, CB, Desta, S and Layne Coppock, D (2004) Stochastic wealth dynamics and risk management among a poor population. The Economic Journal 114, 750777.
Martorell, R (1999) The nature of child malnutrition and its long-term implications. Food & Nutrition Bulletin 20, 288292.
McIntosh, C, Sarris, A and Papadopoulos, F (2013) Productivity, credit, risk and the demand for weather index insurance in smallholder agriculture in Ethiopia. Agricultural Economics 44, 399417.
McPeak, J and Barrett, CB (2001) Differential risk exposure and stochastic poverty traps among East African pastoralists. American Journal of Agricultural Economics 83, 674679.
Miranda, M and Farrin, K (2012) Index insurance for developing countries. Applied Economic Perspectives and Policy 34, 391427.
Mobarak, AM and Rosenzweig, M (2012) Selling formal insurance to the informally insured. Working Paper No. 97, Yale University, Department of Economics, February.
Patt, A, Suarez, P and Hess, U (2010) How do small-holder farmers understand insurance, and how much do they want it? Evidence from Africa. Global Environmental Change 20, 153161.
Prudhomme, C, Giuntoli, I, Robinson, EL, Clark, DB, Arnell, NW, Dankers, R, Fekete, BM, Franssen, W, Gerten, D, Gosling, SN, Hagemann, S, Hannah, DM, Kim, H, Masaki, Y, Satoh, Y, Stacke, T, Wada, Y and Wisser, D (2014) Hydrological droughts in the 21st century, hotspots and uncertainties from a global multimodel ensemble experiment. Proceedings of the National Academy of Sciences 111, 32623267.
Santos, P and Barrett, CB (2011) Persistent poverty and informal credit. Journal of Development Economics 96, 337347.
Sauerborn, R, Berman, P and Nougtara, A (1996) Age bias, but no gender bias, in the intrahousehold resource allocation for helath care in rural Burkina Faso. Health Transition Review 6, 131145.
Soares, FV, Ribas, RP and Hirata, GI (2010) Impact evaluation of a rural conditional cash transfer programme on outcomes beyond health and education. Journal of Development Effectiveness 2, 138157.
Townsend, RM (1994) Risk and insurance in village India. Econometrica 62, 539591.
Winsemius, HC, Jongman, B, Veldkamp, TI, Hallegatte, S, Bangalore, M and Ward, PJ (2015) Disaster Risk, Climate Change, and Poverty: Assessing the Global Exposure of Poor People to Floods and Droughts. World Bank. Policy Research working paper; no WPS 7480. Washington, D.C.: World Bank Group.
Zimmerman, FJ and Carter, MR (2003) Asset smoothing, consumption smoothing and the reproduction of inequality under risk and subsistence constraints. Journal of Development Economics 71, 233260.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Environment and Development Economics
  • ISSN: 1355-770X
  • EISSN: 1469-4395
  • URL: /core/journals/environment-and-development-economics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


JEL classification

Type Description Title
Supplementary materials

Carter and Janzen supplementary material 1
Online Appendix

 PDF (990 KB)
990 KB


Full text views

Total number of HTML views: 11
Total number of PDF views: 114 *
Loading metrics...

Abstract views

Total abstract views: 562 *
Loading metrics...

* Views captured on Cambridge Core between 18th December 2017 - 19th August 2018. This data will be updated every 24 hours.