Developing economies face special challenges in delivering social protection
Rema Hanna, Adnan Khan, and Benjamin Olken
Many people believe that social protection generally involves rich countries aiding those that are poor. Aid is important, particularly for extremely poor countries. Bad shocks can quickly devolve into humanitarian disasters and promote conflict in fragile states, as seen with the current famine in South Sudan, the incipient famine and cholera in Yemen, and the recent Ebola outbreak in Guinea, Liberia, and Sierra Leone.
But for the 108 countries the World Bank classifies as “upper-middle” or “lower-middle” income— for example, India, Morocco, and Peru—overall tax revenue now dwarfs development assistance. Given that growth has been accompanied by increases in global inequality, it is not surprising that redistribution is increasingly taking place within countries. In these environments external support is often important during initial program design and launch, but social protection can be funded primarily through domestic sources in the long run.
As many of these countries increasingly initiate redistribution within their own borders, they are facing challenges different from those in high-income countries. Understanding these differences is critical to grasping how social protection has evolved over time, and how it may change in the future.