Paper: Poverty Traps and Social Protection

This paper demonstrates that there are potentially large returns to social protection policy that stakes out a productive safety net below the vulnerable and keeps them from slipping into a poverty trap. Much of the value of the productive safety net comes from mitigating the ex ante effects of risk and crowding in additional investment.

The analysis also explores the implications of different mechanisms of targeting social protection transfers. In the presence of poverty traps, modestly regressive targeting based on critical asset thresholds may have better long-run poverty reduction effects than traditional needs-based targeting.