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Economic Growth and Social Protection for the Poor and Vulnerable

Economic Growth and Social Protection for the Poor and Vulnerable. Shenggen Fan International Food Policy Research Institute. Senate Conference on “Economic Growth and the Common Good: Effective and Innovative Approaches to Economic Growth and Development’’ The Hague, September 23, 2009.

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Economic Growth and Social Protection for the Poor and Vulnerable

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  1. Economic Growth and Social Protection for the Poor and Vulnerable Shenggen Fan International Food Policy Research Institute Senate Conference on “Economic Growth and the Common Good: Effective and Innovative Approaches to Economic Growth and Development’’ The Hague, September 23, 2009

  2. Rising number of hungry people in the developing world >1 bil. (in million) WFS target Mainly due to food and financial crises Data source: FAO 2006, 2008, 2009.

  3. High and volatile prices undermine food security and livelihoods of the poor Purchasing power: 50-70% of income spent on food and wages do not adjust accordingly Assets and human capital: distressed sale of productive assets, withdrawal of girls from school, etc. As a result, diet quality and quantity decreases and nutritional deficiencies increase Source: J. von Braun 2008.

  4. Slower growth and financial crisis add to the burden • Less capital for agriculture • Higher debt burden for farmers • Reduced employment and wages of unskilled workers • Reduced remittances Source: Source: Data from IMF 2009; Ratha, Mohapatra, and Silwal. 2009; UNCTAD 2009, and World Bank 2009.

  5. Growth matters: Hunger - income linkages Hunger and GDP/ capita in developing countries Source: von Braun, regressions based on data from World Bank 2005 and FAO 2005.

  6. Growth and hunger reduction (1) “Income growth and hunger reduction are tightly wedded” For very poor households, a 10% increase in income increases caloric acquisition by 5% Of the 10 low income countries that reduced hunger index the fastest since 1990, 8 are also among the top 10 in agricultural growth BUT

  7. Growth and hunger reduction (2) “Income growth and pre-school malnutrition are loosely meshed” Direct effect of income growth on pre-school nutrition is low Targeted programs aimed at pre-schoolers are needed (also have high economic returns)

  8. Investments in agriculture are poverty reducing e.g. Ethiopia High growth-poverty elasticity: 1% increase in per capita GDP growth reduces poverty by 2.2% At least 1 extension visit reduces poverty by 9.8% points Increases consumption growth by 7.1% Access to all-weather roads reduces poverty by 6.9% points Increases consumption growth by 16.3% Source: Dercon et al. 2008.

  9. Long-term action for agric. growth:Double public agric. R&D to impact poverty CGIAR investment to rise from US$0.5 to US$1.0 billion as part of this expansion Source: von Braun, Shenggen Fan, et al. 2008.

  10. Also, safety nets needed to decrease poverty and hunger and promote growth Effective safety nets: • Create individual, household & community assets • Protect assets from shocks • Increase the effective use of resources • Facilitate structural reform • Reduce inequality Source: Alderman and Hoddinott 2007.

  11. How much is spent on social protection? • Health (% of GDP) • Germany, France, Sweden: 7-8% • India, Somalia, Georgia: < 1% • Pensions (% of GDP) • Austria, Greece, Poland: 11-13% • Nigeria, Bangladesh, Mozambique: < 1% • Social assistance (% of GDP) • Pakistan, Peru, Colombia, Chile: < 1% Source: Dethier 2007.

  12. Many governments effectively used safety nets to mitigate impacts (though political constraints sometimes limited the response) But some governments did not expand safety nets This is a vital period to reexamine the role of social safety nets, particularly regarding securing access to food Social safety netsand the food and financial crises

  13. Pro-poor social protection and nutrition interventions needed • Protective actions e.g.: • Cash transfers • Employment-based food security programs • Preventive actions e.g.: • School feeding • Early childhood nutrition programs Focus on the most vulnerable: children, women, excluded groups, the poorest

  14. How to scale up social protection? • Start with existing institutions and choose appropriate scale • Strengthen tax base • Improve information and incentives • Create broad-based political and stakeholder support • Pursue public–private partnerships • Draw on global lessons • Think across institutions: markets, microfinance, insurance, services

  15. In sum, strategies towards inclusive growth are needed to: • Accelerate growth and its pro-poor qualities! • Accelerate social spending and its effectiveness!

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