The role of social protection in inclusive structural transformation
Structural transformation involves the reallocation of resources from less to more productive uses. It involves growth in agricultural productivity and generation of higher productivity jobs in other sectors. In addition, in the longer-term, it can support poverty reduction. However, the transition process and its outcomes are frequently challenging – especially among the poor and vulnerable people and households, given the economic and social forces that pressure them to adapt to realities faster than they are able to.
The objective of the paper is to show how social protection policies and programmes can contribute to structural transformation, smoothen the transition for the poor and vulnerable and facilitate changes in their livelihoods such that they are able to actively participate in the process of structural transformation. Social protection interventions help households to engage in new economic activities generated by structural transformation, allow them to better manage the risks of such transitions and provide a safety net for those who are not adequately equipped to adapt to the changing circumstances rapidly enough.
The paper draws from an extended review of the literature to assess how social protection influences human capital, labor mobility, reallocation of resources, productive capital and access to technology. The paper shows that the potential for major benefits from social protection in smoothening transitions and transforming the income generating activities and livelihoods of individuals and households is significant, the actual impact however is smaller than actually desired or expected.