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Shantanu Mukherjee and Shivani Nayyar, Bureau for Development Policy, UNDP
Economic shocks and natural disasters, the latter frequently associated with ongoing climate change, disproportionately affect the poor. Poor households cope with unanticipated shocks in a variety of ways by drawing upon individual, community, market and public resources.
Although such shocks may be of relatively short duration, an extensive body of literature has shown that vulnerable households and individuals may be left to cope in ways that have long term adverse consequences for human development. Such adverse outcomes become more likely during global crises, when many are affected at the same time (aggregate shocks), and some forms of community, market and public mechanisms may falter. The global economic crisis is one such episode, as are the recurrent episodes of high food and energy prices.
In our study, we first bring together some evidence for impacts on human development occasioned by periods of crises, including natural disasters. We then examine the actions – coping mechanisms - that households take to minimize the harm from shocks to their wellbeing, by drawing on on-going surveys that document the impact of the global economic crisis.
Apart from their intrinsic interest, such mechanisms are also important for the policy-maker as they link the better observed, macro indicators of a crisis – such as declines in GDP growth, increases in unemployment and falls in export revenues – to longer term negative impacts such as extended periods of poverty, poorer health, stunted children and worse educational outcomes. While many of these longer term consequences may be irreversible, understanding the coping mechanisms that lead to such outcomes may help in identifying a set of observable characteristics that can be monitored for timely assessment of the impact of a crisis at the household level, as well as helping devise policy interventions that could forestall a negative long term.