P15: Risk-coping mechanisms
(Individual and societal risk coping mechanisms)

PIs: Wagener, Klasen, Menkhoff, Steiner

Globalization is often associated with higher insecurity and uncertainty and, through stronger interdependence, increased correlation and/or different risk mixtures. These changes in risk structures affect individuals and societies, and both adjust their ex ante and ex post mechanisms to cope with changing environments. The nature of risks and the ways in which individuals and societies deal with and share them differ, in theoretically and empirically significant ways, between poor developing economies and advanced industrial countries. At the personal level, risks (from health, poverty, natural disasters) are more existential in poor than in developed societies. Risk-coping mechanisms are much less complete and elaborate in developing economies, often driving individuals to inefficient compensating measures (e.g., selling livestock or sending children to work). Individual capabilities of dealing with risks are very strongly positively associated to income, acerbating income inequalities and leaving the poor also to be the most vulnerable. The income distribution is more skewed towards the right, implying for social assistance programs of any type a larger dependency ratio between net beneficiaries and net contributors. In conjunction with the usual threats to the welfare state (globalization, double ageing, indebtedness), this implies for developing economies higher levels of vulnerability, inequality and absolute as well as relative poverty. From these observations a number of interesting research areas emerge.

Potential dissertation topics:

    Information and knowledge and their role for the design of risk-coping mechanisms in developing countries
  • Asymmetric information in risk-coping mechanisms in developing economies
  • The effectiveness of the new generation of social protection programs in developing countries in mitigating individual and societal risk
  • The design of tax-transfer programs when downside inequality and risks matter
  • Are risks getting more strongly positively associated in globalization and what does this imply for societal risk management in developing countries?