Mohamed Ihsan Ajwad

Cross-Sectional Analyses of Climate Change Impacts

The authors explore the use of cross-sectional analysis to measure the impacts of climate change on agriculture. The impact literature, using experiments on crops in laboratory settings combined with simulation models, suggests that agriculture will be strongly affected by climate change. The extent of these effects varies by country and region. Therefore, local experiments are needed for policy purposes, which becomes expensive and difficult to implement for most developing countries. The cross-sectional technique, as an alternative approach, examines farm performance across a broad range of climates. By seeing how farm performance changes with climate, one can estimate long-run impacts. The advantage of this approach is that it fully captures adaptation as each farmer adapts to the climate they have lived in. The technique measures the full net cost of climate change, including the costs as well as the benefits of adaptation. However, the technique is not concern-free. The four chapters in this paper examine important potential concerns of the cross-sectional method and how they could be addressed, especially in developing countries. Data availability is a major concern in developing countries. The first chapter looks at whether estimating impacts using individual farm data can substitute using agricultural census data at the district level that is more difficult to obtain in developing countries. The study, conducted in Sri Lanka, finds that the individual farm data from surveys are ideal for cross-sectional analysis. Another anticipated problem with applying the cross-sectional approach to developing countries is the absence of weather stations, or discontinued weather data sets. Further, weather stations tend to be concentrated in urban settings. Measures of climate across the landscape, especially where farms are located, are difficult to acquire. The second chapter compares the use of satellite data with ground weather stations. Analyzing these two sources of information, the study reveals that satellite data can explain more of the observed variation in farm performance than ground station data. Because satellite data are readily available for the entire planet, the availability of climate data will not be a constraint. A continuing debate is whether farm performance depends on just climate normals-the average weather over a long period of time-or on climate variance (variations away from the climate normal). Chapter 3 reveals that climate normals and climate variance are highly correlated. By adding climate variance, the studies can begin to measure the importance of weather extremes as well as normals. A host of studies have revealed that climate affects agricultural performance. Since agriculture is a primary source of income in rural areas, it follows that climate might explain variations in rural income. This is tested in the analysis in Chapter 4 and shown to be the case. The analysis reveals that local people in rural areas could be heavily affected by climate change even in circumstances when the aggregate agricultural sector in the country does fine.

Income shocks reduce human capital investments : evidence from five east European countries

This paper empirically investigates whether households affected by income shocks cope by reducing human capital investments. The analysis uses Crisis Response Surveys conducted in Armenia, Bulgaria, Montenegro, Romania, and Turkey during 2009 and 2010. A propensity score matching technique is adopted to compare health and education investment decisions among households that were affected by income shocks to the matched comparison group. The authors find that households affected by income shocks reduced some human capital investments. Interestingly, households in these five countries were more likely to adopt health-related coping strategies as opposed to education-related coping strategies. The results from Armenia, Bulgaria, Montenegro, and Turkey show that households affected by income shocks reduced their visits to doctors and reduced their spending on medicine and medical care significantly more than the matched comparison group. Households affected by income shocks reduced their education investments, but did not adopt harmful education-related coping strategies, such as withdrawing children from schools or moving children from costly private to cheaper public schools. These findings reveal that long-term and possibly intergenerational household welfare could be affected by short-run income shocks and hence underscore the need for governments to employ mitigation measures.

Performance of Social Safety Net Programs in Uttar Pradesh

This paper assesses the effectiveness of core social protection programs in Uttar Pradesh using the following criteria: i) coverage, ii) targeting efficiency; and iii) adequacy and potential impact on household welfare. The study is largely a quantitative assessment. Five main findings emerge from the study. First, many of the social safety net programs implemented in Uttar Pradesh have very low coverage rates, which in turn imply that exclusion errors are very large. Second, although the beneficiaries are disproportionately from poor households, non-poor households are benefiting from the program -- hence, inclusion errors are also a problem. Third, across caste groupings, program beneficiaries from SC/ST households exceed beneficiaries from other caste groups. Fourth, there is considerable geographic variation in program coverage, implying heterogeneity in the effectiveness of service delivery. Fifth, many of the programs have a very small impact on household welfare, even for poor households.

Simulating the Impact of the 2009 Financial Crisis on Welfare in Latvia

This note details simulations of the distributional impacts of the 2009 financial crisis on households in Latvia. It uses household survey data collected prior to the crisis and simulates the impact of the growth slowdown. The simulations show that Latvia experienced a sharp rise in poverty, widening of the poverty gap, and a rise in income inequality due to the economic contraction in 2009. The 18 percent contraction in gross domestic product (affecting mainly trade hotels and restaurants, construction, and manufacturing) likely led the poverty head count to increase from 14.4 percent in 2008 to 20.2 percent in 2009. The poverty gap, which measures the national poverty deficit, was simulated to increase from 5.9 percent in 2008 to 8.3 percent in 2009. The analysis finds that the results are robust to most assumptions except post-layoff incomes, which substantially mitigated household welfare. The authors also simulate the impact of Latvias Emergency Social Safety Net components and find that the Safety Net likely mitigated crisis impacts for many beneficiaries. The simulations measure only direct short-run impacts; hence, they do not take into account general equilibrium effects. Post-crisis income data from a different data source suggest that poverty rates increased by 8.0 percentage points between 2008 and 2009. As a result, the authors suggest that their ex-ante simulation performs reasonably well and is a useful tool to identify vulnerable groups during the early stages of a crisis.

Can public works programs mitigate the impact of crises in Europe? The case of Latvia

To mitigate the impact of the 2008–2010 global financial crisis on vulnerable households, the Government of Latvia established Workplaces with Stipends, an emergency public works program that targeted registered unemployed people who were not receiving unemployment benefits. This paper evaluates the targeting performance and welfare impacts of the program. The paper employs a quasi-experimental estimation strategy and analyzes a unique household survey. The authors find that the Latvian public works program was successful at targeting poor people, and leakage of benefits to non-poor households was small. Using propensity score matching, the authors find that the program’s stipend mitigated the impact of job loss and raised participating household incomes by 37 percent relative to similar households not benefiting from the program. The paper also finds that the forgone income for this program was less than forgone incomes estimated in other countries.JEL codesI38, J64, J68

Do economic crises lead to health and nutrition behavior responses ? analysis using longitudinal data from Russia

Using longitudinal data on more than 2,000 Russian families spanning the period between 2007 and 2010, this paper estimates the impact of the 2009 global financial crisis on food expenditures, health care expenditures, and doctor visits in Russia. The primary estimation strategy adopted is the semi-parametric difference-in-difference with propensity score matching technique. The analysis finds that household health and nutritional behavior indicators do not vary statistically between households that were crisis-affected and households that were not affected by the crisis. However, the analysis finds that crisis-affected poor families curtailed their out-of-pocket health expenditures during and after the crisis more than poor families that were not affected by the crisis did. In addition, crisis-affected vulnerable groups changed their health behavior. In particular, households with low educational attainment of household heads and households with more elderly people changed their health and nutrition behavior response when affected by the crisis. The results are invariant to the propensity score matching techniques and parametric fixed effects estimation models.

Simulating Poverty in Europe: The Potential Contributions of Employment and Education to Reducing Poverty and Social Exclusion by 2020

This paper sheds light on the impact of improving employment and education conditions on poverty and social exclusion indicators. More specifically, it answers the following question: Will achieving the Europe 2020 national targets on employment and education lead countries to achieve the Europe 2020 poverty and social exclusion target with no other policy interventions? The paper presents a simple partial equilibrium model that is flexible enough to be implemented in a number of different settings and uses widely available household survey data. The simulation model analyzes poverty and social exclusion outcomes in response to changes in education completion rates and employment rates. The model is applied to ten of the European Unions new Member States -- Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia -- and the models performance is evaluated through a validation exercise. The Europe 2020 national employment targets are ambitious in many of the new Member States, given historical employment patterns in the countries. Especially in light of the slow and uncertain recovery, labor markets remain weak and employment rates in 2020 could fall short of rates targeted by national policy makers. In this eventuality, the poverty and social exclusion goals may not be reached in many of the new Member States without additional policy measures.

A Methodology Note on the Employment and Welfare Impacts of the 2007-08 Financial Crisis

The welfare impacts of economic downturns generally have to be estimated using simulation tools because of delays in conducting detailed household surveys. This note documents a methodology with which social impacts of an economic slowdown, through its impact on the sources of household income, can be simulated using a simple partial equilibrium model. The simulated impacts are direct, short-run impacts, and do not take into account general equilibrium effects. The methodology has the advantage that it can be implemented in a relatively short time and the data requirements for the analysis are household surveys, which are now generally available in most countries around the world. The methodology was implemented by The World Bank in Turkey and Latvia in early 2009. The main purpose of the work was to help policymakers estimate the scale of the welfare impact on households. This type of information can be crucial to draw attention to the “human impact” of an economic slowdown, but also to help simulate the strength of safety nets needed to avert erosion in human capital. This note will focus on the Latvia and Turkey cases to illustrate the ease with which the model can be adapted to estimating the distributional impacts of economic shocks. Simulations show that both countries will experience a sharp rise in poverty, widening poverty gap, and a rise in income inequality. With an 18 percent GDP contraction in 2009 and the above employment projections, poverty will increase from 14.4 percent to 20.2 percent of the population in Latvia. In Turkey, simulations indicate that estimated GDP contractions of 5 percent and 1 percent in 2009 and 2010 respectively, in the absence of policy changes, will increase poverty headcount from a predicted 17.4 percent (2008) to 21.7 percent.

Did Latvia's Public Works Program Mitigate the Impact of the 2008-2010 Crisis?

To mitigate the impact of the 2008-2010 global financial crisis on vulnerable households, the Government of Latvia established Workplaces with Stipends, an emergency public works program that targeted registered unemployed people who were not receiving unemployment benefits. This paper evaluates the targeting performance and welfare impacts of the program. It exploits the over-subscription of Workplaces with Stipends to define a control group. The paper finds that the program was successful at targeting poor and vulnerable people, and that leakage to non-poor households was small. Using propensity score matching, the paper finds that the programs stipend mitigated the impact of job loss and, in the short term, raised participating household incomes by 37 percent relative to similar households not benefiting from the program. The paper also finds that the foregone income for this program was less than foregone incomes estimated in other countries. This suggests a dearth of income-generating opportunities in Latvia; thus the program provided temporary employment opportunities and helped the unemployed mitigate the impact of the crisis. However, relative to the depth of the crisis in Latvia, the Workplaces with Stipends program scale was small, which meant long waiting periods for program applicants.