Can Social Protection Be an Engine for Inclusive Growth?

Description

The potential role of social protection in the development process has received heightened recognition in recent years, yet making a strong investment case for social protection remains particularly challenging in many emerging and developing countries. This report challenges us to think deeply about the economic rationale for social protection investments through an inclusive development lens. It helps us understand the links between social protection, growth and inequality; how to measure those links empirically; social protection's impact on inclusive growth; and how to build a more solid economic case for greater social protection investments. The report adds to the debate on social protection in three ways. First, it proposes a methodological framework to conceptualise and measure the impact of social protection on what the OECD defines as inclusive growth. Second, it provides new empirical evidence on the impact of different social protection programmes on inclusive growth. Third, it helps strengthen the case for greater investments in social protection while also calling for better data to measure impacts. Foreword Acknowledgements Abbreviations and acronyms Executive summary Assessment and recommendations A conceptual framework to measure the impact of social protection on inclusive growth Social protection may affect inclusive growth through several transmission channels The transmission channels may operate at the micro, meso and macro levels The measurement framework proposed in this study focuses on the micro- determinants of inclusive growth for which a theoretical link exists with social protection and which can be measured in non-specialised household surveys. According to theoretical expectations, many micro-level effects of social protection on inclusive growth shall be positive. Other effects would a priori be unclear or negative. Evidence on the micro-level impact of social assistance on inclusive growth Social assistance tends to spur inclusive growth largely by improving children and youth education outcomes among low-income households The inclusive growth effect of social assistance is less apparent for the working age and elderly population Evidence on the micro-level impact of social insurance on inclusive growth The inclusive growth impact of social insurance for children and youth is not as obvious as that of social assistance Among the working age and the elderly, social insurance tends to support inclusive growth mostly through a positive effect on consumption and a small negative effect on fertility … …but the positive impact of social insurance on inclusive growth may be moderated by a small negative effect on labour supply, and to a lower extent, on savings. Making the case for social protection Argument 1: Under international human rights law, countries are legally obligated to establish social protection systems. Argument 2: Social protection is an effective tool to reduce poverty and tackle vulnerability. Argument 3: Social protection can also make good economic sense. Chapter 1. Measuring the impact of social protection on inclusive growth Inclusive growth and social protection Inclusive growth Social protection Linkages between social protection and inclusive growth Micro linkages Growth effect Effect on inequality reduction Meso and macro linkages Growth effect Effect on inequality reduction Micro-level impacts of social protection on inclusive growth Social protection can support consumption and alter savings patterns Social protection appear to have mixed effects on labour supply Social protection seems to improve education outcomes in poorer households Social protection can foster innovation and investments among the poor Social protection tend to lower fertility rates Social protection seems to have mixed effects on migration References Chapter 2. Micro-level impact of social assistance on inclusive growth Progressivity of social assistance Impact of social assistance on micro drivers of growth Impact of social assistance on children and youth Cash transfers seem to spur investments in schooling Conditional cash transfers appear to have the strongest effect on poor students Scholarships tend to impact positively on educational attainment of the poorest students Conditional cash transfers are likely to reduce child labour Conditional cash transfers may not reduce early pregnancy Universal child benefits seem to have no or limited effects on education Impact of social assistance on working-age individuals and the elderly Conditional cash transfers appear to have mixed effects on employment Conditional cash transfers tend to have positive or no effects on investments in small businesses Conditional cash transfers do not seem to impact investments in formal businesses Conditional cash transfers can reduce fertility rates Scholarships for poor students seem to have positive spillover effects on household food consumption and investments Social pensions can boost household consumption and investments References Annex 2.A. Social assistance in Brazil, Germany, Ghana and Indonesia Brazil Germany Ghana Indonesia Annex notes Annex 2.B. Measuring the impact of social assistance programmes on individual and household outcomes – methodological approach Chapter 3. Micro-level impact of social insurance on inclusive growth Progressivity of social insurance Impact of social insurance on micro drivers of growth Impact of social insurance on children and youth The effect of social insurance on education seem to vary across countries and programmes Evidence on the impact of contributory pensions on child labour and early pregnancy appears to be limited Impact of social insurance on working-age individuals and the elderly Contributory pensions are likely to increase consumption and reduce savings Contributory pensions can drive down labour supply Contributory pensions seem to have a small negative impact on fertility rates Social insurance may have a negative effect on migration outflows Notes References Annex 3.A. Social insurance in Brazil, Germany and Indonesia Brazil Germany Indonesia Annex 3.B. Measuring the impact of social insurance programmes on individual and household outcomes – methodological approach Brazil Germany Indonesia