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How can safety nets contribute to economic growth ?

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  • Alderman, Harold
  • Yemtsov, Ruslan

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.

Suggested Citation

  • Alderman, Harold & Yemtsov, Ruslan, 2013. "How can safety nets contribute to economic growth ?," Policy Research Working Paper Series 6437, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6437
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    2. Erik Thorbecke, 2016. "Inequality and the Trade-off between Efficiency and Equity," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 17(3), pages 460-464, July.
    3. 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, Boston, Massachusetts 236033, Agricultural and Applied Economics Association.
    4. World Bank, "undated". "Africa's Pulse, October 2013 : An Analysis of Issues Shaping Africa's Economic Future," World Bank Publications - Reports 20237, The World Bank Group.
    5. World Bank, 2014. "Prosperity for All / Ending Extreme Poverty : A Note for the World Bank Group Spring Meetings 2014," World Bank Publications - Books, The World Bank Group, number 17701, November.
    6. Imane Helmy & Christian Richter & Khalid Siddig & Hebatallah Ghoneim, 2018. "A Comparison of the Economics Impacts of Conditional and Unconditional Cash Transfers in Egypt," Working Papers 50, The German University in Cairo, Faculty of Management Technology.
    7. 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.
    8. Girmay Berhe Araya, 2020. "Impact of Ethiopia's productive safety net program on manure use by rural households: Evidence from Tigrai, Northern Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 725-742, September.
    9. Thorbecke, Erik, 2014. "The structural anatomy and institutional architecture of inclusive growth in sub-Saharan Africa," WIDER Working Paper Series 041, World Institute for Development Economic Research (UNU-WIDER).
    10. Erik Thorbecke, 2014. "The Structural Anatomy and Institutional Architecture of Inclusive Growth in Sub-Saharan Africa," WIDER Working Paper Series wp-2014-041, World Institute for Development Economic Research (UNU-WIDER).
    11. 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.
    12. Anderson, Kym & Ivanic, Maros & Martin, Will, 2013. "Food price spikes, price insulation, and poverty," Policy Research Working Paper Series 6535, The World Bank.
    13. Cousins, Mel, 2014. "Social Protection in the Mekong: policy trends and future directions," MPRA Paper 60026, University Library of Munich, Germany.
    14. Araya, Girma Behe & Holden , Stein T., 2017. "Is Ethiopia’s Productive Safety Net Program Enhancing Dependency?," CLTS Working Papers 5/17, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 21 Oct 2019.
    15. 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.

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    Keywords

    Safety Nets and Transfers; Labor Policies; Rural Poverty Reduction; Banks&Banking Reform; Debt Markets;
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