Alejandro de la Fuente
Author (s): Alejandro de la Fuente
Author (s): Patrick Premand
Author (s): Cristina Rosemberg, Ricardo Fort, Manuel Glave.
Author (s): Patrick Premand, Renos Vakis
Shocks are often primarily associated with downward mobility or short-term movements in and out of poverty. However, households at the bottom of the welfare distribution are likely to face the most constraints to access insurance mechanisms. In this paper, we consider whether shocks directly affect poverty persistence. In order to analyze the impact of shocks on households’ welfare path over time, we define trajectories as the sequence of households’ position along the welfare distribution as time unfolds. Trajectories provide a consistent representation of households’ mobility when the first-order Markov assumption is violated. In a three-round Nicaraguan panel, we assess the role of shocks in driving two specific mobility patterns. We confirm that shocks contribute to downward mobility, but find novel and robust evidence that shocks trigger poverty persistence, preventing upward movement from the bottom of the distribution. This result points to large potential gains from social risk management policies targeting not only the vulnerable non-poor, but also and in priority the poor.
Author (s): Paul B. Siegel, Alejandro de la Fuente.
Author (s): Alain de Janvry, Elisabeth Sadoulet, 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, we argue that many non-poor households exposed to uninsured shocks have to use children as risk coping instruments, with the risk of creating long term irreversibilities in child human capital development. We review recent experiences to explore how CCT programs could be designed to serve as safety nets for the vulnerable non-poor when hit by a shock. This would require a number of modifications to the way rules of operation of CCT programs are currently designed. As developing countries enter into a period of increasing economic turbulence, providing extended safety nets to the children of the transitory-poor is becoming a key feature of social protection.