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How Can Safety Nets Contribute to Economic Growth?

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  • Harold Alderman
  • Ruslan Yemtsov

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 four 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.

Suggested Citation

  • Harold Alderman & Ruslan Yemtsov, 2014. "How Can Safety Nets Contribute to Economic Growth?," World Bank Economic Review, World Bank Group, vol. 28(1), pages 1-20.
  • Handle: RePEc:oup:wbecrv:v:28:y:2014:i:1:p:1-20.
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    File URL: http://hdl.handle.net/10.1093/wber/lht011
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    1. repec:eee:wdevel:v:107:y:2018:i:c:p:111-124 is not listed on IDEAS
    2. Niu, Chiyu & Arends-Kuenning, Mary, 2016. "No Country for Old Men: An Investment Motive for Downward Inter-generational Transfers in Rural China," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236033, Agricultural and Applied Economics Association.
    3. World Bank, 2014. "Prosperity for All / Ending Extreme Poverty : A Note for the World Bank Group Spring Meetings 2014," World Bank Publications, The World Bank, number 17701, June.
    4. repec:oup:jafrec:v:27:y:2018:i:1:p:127-148. is not listed on IDEAS
    5. Eric ROUGIER & François COMBARNOUS & Yves-André FAURE, 2017. "The ‘local economy’ effect of social transfers: A municipality-level analysis of the local growth impact of the Bolsa Familia Programme in the Brazilian Nordeste," Cahiers du GREThA 2017-09, Groupe de Recherche en Economie Théorique et Appliquée.
    6. Kym Anderson & Maros Ivanic & William J. Martin, 2014. "Food Price Spikes, Price Insulation, and Poverty," NBER Chapters,in: The Economics of Food Price Volatility, pages 311-339 National Bureau of Economic Research, Inc.
    7. Fiszbein, Ariel & Kanbur, Ravi & Yemtsov, Ruslan, 2014. "Social Protection and Poverty Reduction: Global Patterns and Some Targets," World Development, Elsevier, vol. 61(C), pages 167-177.
    8. repec:eee:wdevel:v:103:y:2018:i:c:p:199-215 is not listed on IDEAS
    9. World Bank, "undated". "Africa's Pulse, October 2013 : An Analysis of Issues Shaping Africa's Economic Future," World Bank Other Operational Studies 20237, The World Bank.
    10. Okello, Julius J., 2016. "The Effective Implementation of Social Protection Programmes Can Reduce Household and Community Poverty in Uganda," Miscellaneous Papers 245745, Agecon Search.
    11. Fiszbein, Ariel & Kanbur, Ravi & Yemtsov, Ruslan, 2013. "Social Protection, Poverty, and the Post-2015 Agenda," Working Papers 180070, Cornell University, Department of Applied Economics and Management.
    12. Alderman, Harold & Behrman, Jere R. & Tasneem, Afia, 2015. "The contribution of increased equity to the estimated social benefits from a transfer program: An illustration from PROGRESA:," IFPRI discussion papers 1475, International Food Policy Research Institute (IFPRI).

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