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How Precisely Can We Estimate Vulnerability to Poverty?

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  • Yuan Zhang
  • Guanghua Wan

Abstract

There are alternative definitions of vulnerability to poverty. Most researchers prefer to define vulnerability to poverty as the probability of a household or individual falling into poverty in the future. Based on this definition and using household survey panel data from rural China, this paper attempts to assess the extent to which we can measure vulnerability to poverty. The assessment is based on comparisons between estimated vulnerability and actually observed poverty. The authors find that the precision of estimation, first, varies depending on the vulnerability line; their results suggest setting the line at 50% in order to improve predictive power. Second, precision depends on how permanent income is estimated. Assuming log-normal distribution of future income, it is preferable to use past weighted average income as an estimate of permanent income rather than using regressions to gauge permanent income. Third, estimation precision depends on the chosen poverty line. The percentage of overlap between households estimated to be vulnerable and those actually poor rises when a higher poverty line of US$2 is used instead of US$1.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Oxford Development Studies.

Volume (Year): 37 (2009)
Issue (Month): 3 ()
Pages: 277-287

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Handle: RePEc:taf:oxdevs:v:37:y:2009:i:3:p:277-287

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Cited by:
  1. Amendola, Nicola & rossi, mariacristina & Vecchi, Giovanni, 2012. "Vulnerability to poverty in Italy," MPRA Paper 38583, University Library of Munich, Germany.
    • Nicola Amendola & Mariacristina Rossi & Giovanni Vecchi, 2012. "Vulnerability to Poverty in Italy," Working papers 007, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
  2. Ebru Çaglayan & Naime Irem Kosan & Melek Astar, 2012. "An Empirical Analysis of the Determinants of Household Poverty in Turkey," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 181-191, March.
  3. Nuno Crespo & Sandrina B. Moreira & Nádia Simões, 2012. "An Integrated Approach for the Measurement of Inequality, Poverty and Richness," Working Papers Series 2 12-03, ISCTE-IUL, Business Research Unit (BRU-IUL).
  4. Katja Landau & Stephan Klasen & Walter Zucchini, 2012. "Measuring Vulnerability to Poverty Using Long-Term Panel Data," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 118, Courant Research Centre PEG.
  5. You, Jing, 2013. "The role of microcredit in older children’s nutrition: Quasi-experimental evidence from rural China," Food Policy, Elsevier, vol. 43(C), pages 167-179.

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