TY - JOUR AU - Ikegami, Munenobu AU - Carter, Michael R AU - Barrett, Christopher B AU - Janzen, Sarah A TI - Poverty Traps and the Social Protection Paradox JF - National Bureau of Economic Research Working Paper Series VL - No. 22714 PY - 2016 Y2 - October 2016 DO - 10.3386/w22714 UR - http://www.nber.org/papers/w22714 L1 - http://www.nber.org/papers/w22714.pdf N1 - Author contact info: Munenobu Ikegami Faculty of Economics, Hosei University 4342 Aihara, Machida, Tokyo, 194-0298 Japan E-Mail: munenobuikegami@hosei.ac.jp Michael Carter Department of Agricultural and Resource Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-4672 Fax: 530/752-5614 E-Mail: mrcarter@ucdavis.edu Christopher B. Barrett 12 Brookhaven Drive Ithaca, NY 14850 Tel: 1.607.255.4489 E-Mail: cbb2@cornell.edu Sarah A. Janzen Department of Economics Montana State University Bozeman, MN 59717; USA E-Mail: sajanzen@ksu.edu M1 - published as Munenobu Ikegami, Michael R. Carter, Christopher B. Barrett, Sarah Janzen. "Poverty Traps and the Social Protection Paradox," in Christopher B. Barrett, Michael R. Carter, and Jean-Paul Chavas, editors, "The Economics of Poverty Traps" University of Chicago Press (2019) M3 - presented at "The Economics of Asset Accumulation and Poverty Traps", June 28-29, 2016 AB - Progressively targeted cash transfers remain the dominant policy response to chronic poverty in developing countries. But are there alternative social protection policies that might have larger poverty impacts over time for the same public expenditure? To explore this question, this paper develops a dynamic stochastic model of of consumption and asset accumulation by households that confront a non-convex production technology and face missing financial markets. The model demonstrates that a hybrid social protection policy, which devotes resources to funding “state of the world contingent transfers” (SWCTs) to vulnerable, but non-poor households in the wake of negative shocks, can result in lower rates of poverty in the medium term than does a conventional cash transfer policy. We also explore the prospects for using subsidized index insurance as a way to implement SWCTs and find that an insurance-based hybrid policy can result in lower total public expenditures than a conventional cash transfer social protection program. ER -