2008  Risk and Vulnerability Analysis in World Bank Analytic Work: FY2000-FY2007 (396kb pdf)
Social Protection Discussion Paper No. 0812; Publication Date: 05/08
by Valerie Kozel, Pierre Fallavier and Reena Badiani
This paper takes stock of the World Bank’s risk and vulnerability analysis from FY00 to FY07. It complements recent assessments of Social Protection and Labor (SP&L) sector’s lending and analytic activities on labor markets, pensions, social safety nets, and social funds. The review of 155 papers shows how risk and vulnerability have become part of the Bank’s understanding of poverty as a “dynamic” concept, which considers not only the characteristics of poor households at a specific point in time but also of those at risk of becoming poor following specific shocks (e.g., from a sickness in the family to the effect of a natural disaster). In terms of policy, the paper highlights the importance of measures to prevent vulnerable groups from falling into poverty and to help them cope with the aftermaths of shocks. The Social Risk Management (SRM) strategy provides a conceptual and methodological framework for the paper, which highlights the richness and diversity of risk and vulnerability practices in the Bank’s work by region and presents a variety of best practices. It points to rising levels of insecurity among poor and vulnerable groups despite global progress in reducing poverty, and it identifies strong linkages between extreme poverty and risk in low income countries. Addressing risks for vulnerable groups hence emerges as a key concern for inclusive and sustainable globalization. It concludes by calling for continuously improving the treatment of risk and vulnerability in poverty assessments, for complementing these analyses with free-standing studies of specific risks, for improving the collection of relevant data, and for developing the policy use of the analyses conducted.
2007
Seasonal Migration and Early Childhood Development (385kb pdf)
Social Protection Discussion Paper No. 0702; Publication Date: 03/07
by Karen Macours and Renos Vakis This paper provides unique evidence of the positive consequences of seasonal migration for investments in early childhood development. The authors analyze migration in a poor shock-prone border region in rural Nicaragua where it offers one of the main household income diversification and risk coping strategies. IV estimates show, somewhat surprisingly, that in particular mother’s migration has a positive effect on early cognitive development. The authors attribute these findings to changes in income and to the intra-household empowerment gains resulting from mother’s migration, which offset potential negative ECD effects from temporary lack of parenting. This paper, hence, illustrates how increased opportunities in seasonal migration due to higher South-South mobility might positively affect early childhood development and as such long-term poverty reduction.
2006
Risk and Vulnerability Considerations in Poverty Analysis: Recent Advances and Future Directions (348kb pdf)
Social Protection Discussion Paper No. 0610; Publication Date: 10/06
by Carlo Cafiero and Renos Vakis In the recent past, growing attention has been devoted to the attempt to correctly include considerations of exposure to risk in the discussions on poverty reduction and, more generally, economic and social development. The purpose of this article is to take stock of all these efforts and to reconsider the relationship between poverty and exposure to risk. The authors present a short review of current practices of vulnerability measurement to discuss how none of them is truly consistent with an ex-ante view of assessing the true consequences of risk exposure. The authors argue that one way of addressing this inconsistency is by adding an estimate of the insurance cost needed to guarantee a socially accepted minimum level of welfare to the level of consumption expenditure taken as a benchmark to identify the poor. In other words, the authors define an augmented poverty line where the traditional absolute poverty benchmark level is marked up by the estimated cost of insuring against what are considered socially unacceptable risks. The authors then discuss the practical implications for implementing such a measure and future research directions. Uninsured Risk and Asset Protection: Can Conditional Cash Transfer Programs Serve as Safety Nets? (250kb pdf)
Social Protection Discussion Paper No. 0604; Publication Date: 06/06
by Alain de Janvry, Elisabeth Sadoulet, Pantelis Solomon and Renos Vakis Conditional cash transfer (CCT) programs have proved to be effective in inducing chronic poor households to invest in the human capital of their children while helping reduce poverty. They have also protected child human capital from the shocks that affect these households. In this paper, the authors argue that many non-poor households exposed to uninsured shocks have to use children as risk coping instruments, creating long term irreversibilities in child human capital development. The authors explore how CCT programs can be designed to serve as safety nets for the vulnerable non-poor when hit by a shock. This would help them not use children as risk coping instruments, thus avoiding long term irreversibilities in child human capital development and creation of a source of new poor. Complementing Natural Disasters Management: The Role of Social Protection (367kb pdf)
Social Protection Discussion Paper No. 0543; Publication Date: 02/06
by Renos Vakis Natural disasters have a huge impact on social and economic welfare. Policies to manage them need to be integrated and well grounded to the specificities of natural hazards as well as local capacities in terms of fiscal, administrative and economic capabilities. A well designed natural disasters management strategy crucially depends on carefully assessing and planning responses before, during and after the disaster occurs. This policy note discusses the complementary role that Social Protection can play in the formation of an effective strategy for natural disasters management.
2005
Measuring Risk Perceptions: Why and How (217kb pdf)
Social Protection Discussion Paper No. 0533; Publication Date: 07/05
by Joachim De Weerdt
Economists study data on choices that people make and from this deduce people’s preferences and expectations. This identification process, as well as the predictions based on it, becomes flawed when multiple sets of preferences and expectations are consistent with the same data. One way forward would be to measure directly people’s expectations on future states of the world. This paper discusses the theoretical merits and practical constraints of doing so. Data on risk perceptions seem particularly relevant for understanding savings and investment behaviour in the developing world, where risk is pervasive and often posited to have significant costs. Although the main aim of the paper is thinking through the ‘whys’ and the ‘hows’ of measuring risk perception, some interesting, but still unrepresentative findings from the field are presented.
2004 Can Conditional Cash Transfer Programs Improve Social Risk Management? Lessons for Education and Child Labor Outcomes (225KB PDF)
Social Protection Discussion Paper No. 0420; Publication Date: 12/04
by Elisabeth Sadoulet, Frederico Finan, Alain de Janvry, and Renos Vakis This paper explores the role of Conditional Cash Transfer (CCT) programs in serving as a risk management instrument for the poor. Using various rounds of panel data from the successful CCT Progresa program in Mexico, the impact analysis indicates a number of interesting patterns. First, strong state dependence indicates that children taken out of school (partly due to shocks) are less likely to subsequently return, implying long-term consequences from short-term decisions. Nonetheless, the CCT program seems to mitigate this state dependence. Second, a number of shocks - such as unemployment or illness of the household head or younger children, droughts, natural disasters in the community and loss of land, harvest, or animals - have strong effects on children’s schooling attainment, indicating that children are used as risk coping instruments. While this creates short run consumption smoothing gains for the household, such coping strategy implies long-term losses in human capital for children that are accentuated by state dependence. Again, the impact evaluation analysis shows that the Progresa transfers compensate for these shocks, protecting child schooling from a range of shocks. Finally, while the shocks reported also seem to induce children to work - particularly girls and children of farm workers when their parents are affected by unemployment -, the impact evaluation suggests that Progresa transfers and the conditionality on school attendance serve to deter using child labor as a risk coping strategy. Measuring Welfare for Small but Vulnerable Groups: Poverty and Disability in Uganda (104KB PDF)
Social Protection Discussion Paper No. 0419; Publication Date: 09/04
by Johannes G. Hoogeveen
When vulnerable population groups are numerically small – as is often the case, obtaining representative welfare estimates from non-purposive sample surveys becomes an issue. Building on a method developed by Elbers, Lanjouw and Lanjouw (2003) it is shown how, for census years, estimates of income poverty for small vulnerable populations can be derived by combining sample survey and population census information. The approach is illustrated for Uganda, for which poverty amongst households with disabled heads is determined. This is possibly the first time that, for a developing country, statistically representative information on income poverty amongst disabled people is generated.
Shocks and Coffee: Lessons from Nicaragua (207KB PDF)
Social Protection Discussion Paper No. 0415; Publication Date: 07/04
by Renos Vakis, Diana Kruger and Andrew D. Mason
Using household level panel data from Nicaragua, this paper explores the impact of the recent coffee crisis on rural households engaged in coffee production and coffee labor work. Taking advantage of the panel structure of the data, a number of findings emerge: (i) while overall growth between 1998 and 2001 was widespread in rural Nicaragua, coffee households saw large declines in various socioeconomic outcomes; (ii) among coffee households, it is small farm households that were affected the most and not poor labor households as previously expected; (iii) even though coffee households used various risk management strategies to address the shock, it was pre shock, ex-ante strategies (like income diversification) that were the most effective in allowing coffee households insulate against the shock. By contrast, the coffee households that used ex-post coping instruments did not manage to mitigate the adverse impact as well, with additional potential long run implications via extensive uses of harmful coping strategies (like increases in child labor); and (iv) the coffee shock affected upward mobility and downward poverty vulnerability of coffee households. Such findings seem to confirm the widespread impact of shocks on overall household behavior and indicate the importance of incorporating risk management in the policy agenda of poverty reduction.
Evaluating Different Approaches to Estimating Vulnerability (1.7MB PDF)
Social Protection Discussion Paper No. 0410; Publication Date: 06/04
by Ethan Ligon and Laura Schechter
A number of researchers have recently proposed a variety of different `vulnerability' measures designed to capture the welfare consequences of risk for poor households, and also proposed a variety of different approaches to estimating these various measures of household vulnerability. However, it's possible to `mix-and-match' estimators and measures. Here we conduct Monte Carlo experiments designed to explore the performance of different estimators with different measures, under different assumptions regarding the underlying economic environment. We find that when the environment is stationary and consumption expenditures are measured without error that the best estimator is one proposed by Chaudhuri (2001), regardless of what measure of vulnerability is employed. If the vulnerability measure is risk-sensitive, but consumption is measured with error, a simple estimator proposed by Ligon and Schechter (2003) generally performs best. However, when the distribution of consumption is non-stationary, a modification of an estimator proposed by Pritchett et al. (2000) performs best. Future research should focus on combining the efficiency of the Chauduri estimator with the good properties of the Ligon-Schechter (in environments with measurement error) and Pritchett (in non-stationary environments) estimators. However, even with present technology estimating vulnerability is simple and much more informative and useful than are static poverty measures, provided one has at least two rounds of panel data.
Risk and Vulnerability in Guatemala: A Quantitative and Qualitative Assessment (1.4MB PDF)
Social Protection Discussion Paper No. 0404; Publication Date: 03/04
by Emil D Tesliuc and Kathy Lindert
This study combines quantitative data from the Living Standards Measurement Study and qualitative information from an in-depth qualitative study of poverty and exclusion conducted in 10 villages in Guatemala. Both data sources were designed to capture issues related to vulnerability, risks, and risk management. The quantitative survey included a risks and shocks module, in which households were asked to report if they had experienced a shock during the previous 12 months, using precoded questions for 28 economic, natural, social/political, and life-cycle shocks. These shocks were classified ex ante into covariant and idiosyncratic shocks. Households also reported: (1) whether these shocks triggered a reduction or loss of their income or wealth; (2) the main strategy that they used to cope with their welfare loss; (3) if they had succeeded in reversing the reduction or loss in their welfare by the time of the survey, and (4) the estimated time that had elapsed until successful resolution of the situation. Information on covariant shocks was also collected from the community questionnaire at the survey cluster level.
Consumption Insurance and Vulnerability to Poverty: A Synthesis of the Evidence from Bangladesh, Ethiopia, Mali, Mexico and Russia (322KB PDF)
Social Protection Discussion Paper No. 0401; Publication Date: 01/04
by Emmanuel Skoufias and Agnes R. Quisumbing
This paper brings together some of the empirical work conducted by IFPRI researchers which investigates linkages among the degree of consumption insurance, households' vulnerability to poverty, and household use of formal and informal coping mechanisms using the same empirical approach in five different countries.
Methods for Microeconometric Risk and Vulnerability Assessments (337KB PDF)
Social Protection Discussion Paper No. 0324; Publication Date: 12/03
by John Hoddinott and Agnes Quisumbing
This "toolkit" provides quantitative tools to practitioners who want to undertake risk and vulnerability assessments using household data. While one could use price, exchange rate, and balance of payments data to examine macroeconomic shocks, and rainfall data to assess the severity of droughts and floods, we are ultimately interested in their impacts on households - thus the emphasis on household data.
Data Sources for Microeconometric Risk and Vulnerability Assessments (252KB PDF)
Social Protection Discussion Paper No. 0323; Publication Date: 12/03
by John Hoddinott and Agnes Quisumbing
This "toolkit" is designed to assist practitioners undertaking vulnerability assessments by identifying data sources, assessing their suitability for risk and vulnerability measurement, and proposing suggestions for data collection to supplement existing sources. It complements "Methods for Microeconometric Risk and Vulnerability Assessments: A Review with Empirical Examples" (Hoddinott and Quisumbing 2003), which discusses techniques for assessing vulnerability and issues relating to their application. The emphasis in both toolkits is on quantitative, survey-based methods for vulnerability assessment, although this document will also discuss contextual methods similar to those used in livelihoods-based approaches. This paper draws heavily on papers and discussions at an International Food Policy Research Institute/World Bank (IFPRI/WB) Workshop on Risk and Vulnerability: Estimation and Policy Implications held at the International Food Policy Research Institute in September 2002.
Guidelines for Assessing the Sources of Risk and Vulnerability (392KB PDF)
Also available in French (462KB PDF), Russian (973KB PDF) and Spanish (553KB PDF)
Social Protection Discussion Paper No. 0218; Publication Date: 06/02
by Karin Heitzmann, R. Sudharshan Canagarajah and Paul B. Siegel
Social risk management (SRM) is a new means of looking at poverty, risk, and risk management that was recently presented in the World Bank's Social Protection Strategy Paper. The SRM perspective addresses how vulnerable households can be helped to better manage risks and become less susceptible to potentially damaging welfare losses. This paper provides some basic concepts and guidelines for organizing ideas and information that are relevant to risk and vulnerability assessments. Several templates are provided in the Annex, along with a list of completed and ongoing World Bank reports that investigate risk and vulnerability.
Viewing Microinsurance as a Social Risk Management Instrument (128KB PDF)
Social Protection Discussion Paper No. 0116; Publication Date: 6/01
by Paul B. Siegel, Jeffrey Alwang and Sudharshan Canagarajah
The objectives of this paper are to highlight some of the potential and limitations of microinsurance in the context of Social Risk Management (SRM) framework to stimulate further discussion. The paper draws on existing literature on SRM and microinsurance. Where relevant, it invokes lessons from microfinance. The authors conclude that there is potential for efficient and equitable risk management through microinsurance, but also limitations. Microinsurance may be an acceptable means of managing a few limited forms of risk, but not all. SRM practitioners need to recognize that effectiveness of any risk management instrument depends on the nature of risks, household and group characteristics and dynamics, and the availability of alternative risk management options.
SRM options should strike a balance between household risk management activities and the multiple instruments available at different institutional levels, including informal, market-based, and publicly provided mechanisms. Microinsurance is a potential part of the SRM toolbox, but risk management can be enhanced through different mechanisms or combinations of them.
Vulnerability: A View from Different Disciplines (146KB PDF)
Social Protection Discussion Paper No. 0115; Publication Date: 6/01
by Jeffrey Alwang, Paul B. Siegel, Steen L. Jørgensen
Practitioners from different disciplines use different meanings and concepts of vulnerability, which, in turn, have led to diverse methods of measuring it. This paper presents a selective review of the literature from several disciplines to examine how they define and measure vulnerability. The disciplines include economics, sociology/anthropology, disaster management, environmental science, and health/nutrition. Differences between the disciplines can be explained by their tendency to focus on different components of risk, household responses to risk and welfare outcomes. In general, they focus either on the risks (at one extreme) or the underlying conditions (or outcomes) at the other. Trade-offs exist between simple measurement schemes and rich conceptual understanding.
Risk and Vulnerability: The Forward Looking Role of Social Protection in a Globalizing World (113KB PDF)
Social Protection Discussion Paper No. 0109; Publication Date: 03/01
by Robert Holzmann
The paper outlines a forward-looking role of social protection against the background of increasing concerns about risk and vulnerability, exemplified by the recent East Asian crisis, the concerns of the World Development Report (WDR) 2000, the need for a better understanding of poverty dynamics, and the opportunity and risks created by globalization. These considerations and the need for a more proactive approach to lasting poverty reduction have led to the development of a new conceptual framework which casts social protection as social risk management. The paper highlights the main elements of the new conceptual framework and its main strategic conclusions for attacking poverty before addressing crucial issues for its implementation: The need for an operational definition of vulnerability; the use of social risk assessments as an operational entry point for a new policy dialogue; economic crisis management and the lessons for social protection; and the undertaking of social expenditure reviews to enhance the effectiveness of government intervention for addressing risk and vulnerability. The pilot experience with some of these elements yields cautious optimism that a promising road for addressing poverty has been found.
Social Risk Management: A New Conceptual Framework for Social Protection and Beyond (138KB PDF)
Also available in French (144KB PDF), Russian (452KB PDF) and Spanish (134KB PDF)
Social Protection Discussion Paper No. 0006; Publication Date: 02/00
by Robert Holzmann and Steen Jørgensen
This paper proposes a new definition and conceptual framework for Social Protection grounded in Social Risk Management. The concept repositions the traditional areas of Social Protection (labor market intervention, social insurance and social safety nets) in a framework that includes three strategies to deal with risk (prevention, mitigation and coping), three levels of formality of risk management (informal, market-based, public) and many actors (individuals, households, communities, NGOs, governments at various levels and international organizations) against the background of asymmetric information and different types of risk. This expanded view of Social Protection emphasizes the double role of risk management instruments protecting basic livelihood as well as promoting risk taking. It focuses specifically on the poor since they are the most vulnerable to risk and typically lack appropriate risk management instruments, which constrains them from engaging in riskier but also higher return activities and hence gradually moving out of chronic poverty. An Asset-Based Approach to Social Risk Management: A Conceptual Framework (251KB PDF)
Social Protection Discussion Paper No. 9926; Publication Date: 10/99
by Paul B. Siegel and Jeffrey Alwang
There is increasing concern about the vulnerability of poor and near-poor rural households, who have limited capabilities to manage risk and often resort to strategies that can lead to a vicious cycle of poverty. Household-related risk is usually considered individual or private, but measures to manage risk are actually social or public in nature. Furthermore, various externality issues are associated with household-related risk, such as its links to economic development, poverty reduction, social cohesion, and environmental quality. Hence the need for a holistic approach to risk management, or "social risk management", which encompasses a broad spectrum of private and public actions. An asset-based approach to social risk management is presented, which provides an integrated approach to considering household, community, and extra-community assets and risk management strategies. The conceptual framework for social risk management focuses on rural Sub-Saharan Africa. The paper concludes with several suggestions on moving from concepts to actions.
Social Protection as Social Risk Management: Conceptual Underpinnings for the Social Protection Sector Strategy Paper (90KB PDF)
Social Protection Discussion Paper No. 9904; Publication Date: 01/99
by Robert Holzmann and Steen Jørgensen
The Social Protection Family of the World Bank is scheduled to develop its Sector Strategy Paper (SSP) by the fall of 1999. This is an opportunity for the sector to take stock of its accomplishments and to develop the strategic thrust of the Bank's future work in this area. This note serves as a conceptual background piece for this work, and is currently being used as background for the development of regional social protection strategy papers. Top |
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