Strengthening SRM and DRM in the Market, State, and Community - PowerPoint PPT Presentation

“Protecting Poor and Vulnerable Families from the Economic Shocks of Disasters: the Role of Social Protection” March 23, 2015, Tohoku University Strengthening SRM and DRM in the Market, State, and Community Trinity: Insights from Japan’s Experience Yasuyuki Sawada Rikuzentakata in May 2011 University of Tokyo 1

Outline Summary of World Bank’s Strategy: • SRM to mitigate social and economic impacts from natural disasters Comments 1. The market, state, and community trinity 2. Japan’s experience 3. Cost effectiveness of hybrid programs? 4. Use of innovations? 2

Outline Summary of World Bank’s Strategy: • SRM to mitigate social and economic impacts from natural disasters Comments 1. The market, state, and community trinity 2. Japan’s experience 3. Cost effectiveness of hybrid programs? 4. Use of innovations? 3

Summary • We are exposed to (increasing) social and disaster risks (idiosyncratic to covariate) • SRM and DRM to strengthen risk management & resilience (i.e., risk reduction, mitigation, and ex- post coping) • Naturally, a hybrid program of SRM and DRM (see Sawada (2007), “The impact of natural and manmade disasters on household welfare” Agricultural Economics ). – Brazil’s Bolsa Familia program – Ethiopia’s PSNP – Mexico’s PET, Philippines’ 4P, and Pakistan’s FECT • Institutionalization of such hybrid programs • Japan’s experience? 4

Outline Summary of World Bank’s Strategy: • SRM to mitigate social and economic impacts from natural disasters Comments 1. The market, state, and community trinity 2. Japan’s experience 3. Cost effectiveness of hybrid programs? 4. Use of innovations? 5

Outline Summary of World Bank’s Strategy: • SRM to mitigate social and economic impacts from natural disasters Comments 1. The market, state, and community trinity 2. Japan’s experience Broader framework? 3. Cost effectiveness of hybrid programs? 4. Use of innovations? 6

Basic Problem: Reconciliation of resource fluctuations & livelihood (consumption) smoothing Thai data from Christina Paxson (1993) "Consumption and Income Seasonality in Thailand," Journal of Political Economy vol. Filipino data from Yujiro Hayami (1978) 101(1), pages 39- 72,” Anatomy of Peasant Economy , IRRI. 7

Basic Problem: Reconciliation of resource fluctuations & livelihood (consumption) smoothing • A variety of informal and formal (or market & non- market) risk management or insurance mechanisms – Ex ante risk management • Investments for resilience • Production and income risk diversifications – Ex post risk coping • Consumption reallocation • Credit transactions • Dissaving of precautionary assets • Human assets • Private and public transfers • Disasters: unforeseen contingencies which generate unexpected sharp decline of resources 8

Admittedly, we are exposed to risks 9

The Market, State, and Community Trinity 10

The Market, State, and Community Trinity SRM/DRM 11

Very Weak Market Mechanisms (Source) Munich RE Sawada and Nakata (2008) 12

Very Weak Market Mechanisms How can we overcome this? How can we strengthen the trinity? (Source) Munich RE Role of SRM and DRM? Sawada and Nakata (2008) 13

Outline Summary of World Bank’s Strategy: • SRM to mitigate social and economic impacts from natural disasters Comments 1. The market, state, and community trinity 2. Japan’s experience 3. Cost effectiveness of hybrid programs? 4. Use of innovations? 14

Cases of Kobe, Yamakoshi, and Sendai Yamakoshi (2004) Sendai (2011) Kobe (1995) Kobe (1995) 15

Cases of Kobe, Yamakoshi, and Sendai (Source) Sawada and Shimizutani (2008), Ichimura, Sawada, and Shimizutani (2007, 2012)

Cases of Kobe, Yamakoshi, and Sendai • A hybrid of SRM and DRM to complement effective insurance

The Market, State, and Community Trinity SRM/DRM 18

Japan’s Disaster Management System Under the Disaster Countermeasures Basic Act 19

Cases of Kobe, Yamakoshi, and Sendai • A hybrid of SRM and DRM to complement effective insurance

The Market, State, and Community Trinity SRM/DRM 21

Cases of Kobe, Yamakoshi, and Sendai • A hybrid of SRM and DRM to complement effective insurance * In-kind transfers and volunteer activities

Futaba Town, Fukushima Futaba, Fukushima

A Survey of Futaba Town Residents Iwasaki, Sawada, and Aldrich （ 2015 ） K 6 Depression Measure

Determinants of K 6 in Futaba Heckman Coefficient Label correction K 6 has been kept low if ： income after disaster -0.46 *** -0.50 *** • Post-disaster income is high (0.16 ) (0.17 ) health deterioration 3.50 *** 3.47 *** • Good health condition (0.39 ) (0.38 ) "help" (network) after disaster 0.54 0.44 • High level of GSS Trust (0.45 ) (0.45 ) "trust" (trust) after disaster -1.10 *** -1.13 *** (0.36 ) (0.36 ) "help2" (trust) after disaster -0.22 -0.18 SC seems to amend (0.32 ) (0.32 ) "recreation" (participation) after disaster 0.06 0.06 market and government (0.12 ) (0.12 ) － Inverse Mills ratio -1.21 failures － (0.81 ) Constant 0.09 1.92 (2.01 ) (2.58 ) － Correlation coefficient of between error -0.24 － Standard error of the error term 4.99 Number of observations 296 5449(291) － Adjusted R2 0.285

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The Market, State, and Community Trinity SRM/DRM 27

Outline Summary of World Bank’s Strategy: • SRM to mitigate social and economic impacts from natural disasters Comments 1. The market, state, and community trinity 2. Japan’s experience 3. Cost effectiveness of hybrid programs? 4. Use of innovations? 28

Cost effectiveness of hybrid programs? • CCT with self-selection RCT RCT-bas ased ed cost compar parisons ons to extend end mechanisms minimize inclusion school hooling ng by one year ar (USD, in log) and exclusion errors in poverty targeting. – Many success stories in post- disaster situations (EGS & NREGA in India, CFW Japan) • Yet, it may be quite expensive (see right) if we combine SRM and DRM. • How can we cut the overall cost inefficiencies? (Source) JPAL 29

Outline Summary of World Bank’s Strategy: • SRM to mitigate social and economic impacts from natural disasters Comments 1. The market, state, and community trinity 2. Japan’s experience 3. Cost effectiveness of hybrid programs? 4. Use of innovations? 30

Use of Innovations? • Use of technologies – (a sort of ) PPP in SRM and DRM to strengthen the trinity? • MF (microcredit and microinsurance) in SRM and DRM • Verifications and matching by technologies • Use of ICT and branchless banking networks – Index insurance contracts written against aggregate events (as opposed to indemnity-based insurance) • Weather index risk transfer products • NDVI-based index insurance to tackle droughts • Macro index insurance (CCRIF and PCRAFI) • “The last one mile problem” due to human behavior • Care for psychosocial impacts