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

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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 Japans

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“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 University of Tokyo

1

Rikuzentakata in May 2011

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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

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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

Outline

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  • 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

Summary

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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

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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?

6

Outline Broader framework?

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7 Thai data from Christina Paxson (1993) "Consumption and Income Seasonality in Thailand," Journal of Political Economy vol. 101(1), pages 39-72,” Filipino data from Yujiro Hayami (1978) Anatomy of Peasant Economy, IRRI.

Basic Problem:

Reconciliation of resource fluctuations & livelihood (consumption) smoothing

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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

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Admittedly, we are exposed to risks

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The Market, State, and Community Trinity

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The Market, State, and Community Trinity

SRM/DRM

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(Source) Munich RE

Sawada and Nakata (2008)

Very Weak Market Mechanisms

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(Source) Munich RE

Sawada and Nakata (2008)

Very Weak Market Mechanisms

How can we overcome this? How can we strengthen the trinity? Role of SRM and DRM?

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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

Outline

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15

Cases of Kobe, Yamakoshi, and Sendai

Kobe (1995) Kobe (1995) Sendai (2011) Yamakoshi (2004)

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Cases of Kobe, Yamakoshi, and Sendai

(Source) Sawada and Shimizutani (2008), Ichimura, Sawada, and Shimizutani (2007, 2012)

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Cases of Kobe, Yamakoshi, and Sendai

  • A hybrid of SRM and DRM to complement effective insurance
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The Market, State, and Community Trinity

SRM/DRM

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Japan’s Disaster Management System

Under the Disaster Countermeasures Basic Act

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Cases of Kobe, Yamakoshi, and Sendai

  • A hybrid of SRM and DRM to complement effective insurance
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The Market, State, and Community Trinity

SRM/DRM

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Cases of Kobe, Yamakoshi, and Sendai

  • A hybrid of SRM and DRM to complement effective insurance

* In-kind transfers and volunteer activities

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Futaba Town, Fukushima

Futaba, Fukushima

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A Survey of Futaba Town Residents

Iwasaki, Sawada, and Aldrich （2015） K6 Depression Measure

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K6 has been kept low if：

  • Post-disaster income is high
  • Good health condition
  • High level of GSS Trust

SC seems to amend market and government failures

Label

income after disaster

  • 0.46 ***
  • 0.50 ***

(0.16 ) (0.17 ) health deterioration 3.50 *** 3.47 *** (0.39 ) (0.38 ) "help" (network) after disaster 0.54 0.44 (0.45 ) (0.45 ) "trust" (trust) after disaster

  • 1.10 ***
  • 1.13 ***

(0.36 ) (0.36 ) "help2" (trust) after disaster

  • 0.22
  • 0.18

(0.32 ) (0.32 ) "recreation" (participation) after disaster 0.06 0.06 (0.12 ) (0.12 ) Inverse Mills ratio

  • 1.21

(0.81 ) Constant 0.09 1.92 (2.01 ) (2.58 ) Correlation coefficient of between error Standard error of the error term Number of observations Adjusted R2 4.99 5449(291) － － －

  • 0.24

0.285 296 － －

Heckman correction Coefficient

Determinants of K6 in Futaba

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26

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The Market, State, and Community Trinity

SRM/DRM

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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

Outline

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  • CCT with self-selection

mechanisms minimize inclusion 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?

29

Cost effectiveness of hybrid programs?

RCT RCT-bas ased ed cost compar parisons

  • ns to extend

end school hooling ng by one year ar (USD, in log) (Source) JPAL

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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

Outline

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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