IDEAS home Printed from https://ideas.repec.org/p/cdi/wpaper/143.html
   My bibliography  Save this paper

On the Economic Vulnerability of Low Income Countries

Author

Listed:
  • Patrick GUILLAUMONT

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

Abstract

This paper examines the relevance of the concept of economic vulnerability for low income countries, a topic of recent concern in several international bodies. It first proposes some conceptual clarifications and a method to build an internationally comparable indicator. Three factors of vulnerability are identified: shocks, exposure and resilience or capacity to react (the first two ones being more structural, the third one more related to policy). To measure the two main kinds of shocks (natural and external), proposed proxies are respectively the instability of agricultural production and the instability of the purchasing power of exports, while the (smallness of) the population size can be used as a proxy for (structural) exposure. To aggregate the various possible indicators of shocks and exposure in a composite index of structural economic vulnerability, weights can be drawn from their estimated impact on growth. Then selected issues related to the impact of vulnerability on growth are considered: "primary" instabilities (natural events, terms of trade, political troubles) are found to slow growth, more by their effect on the total factor productivity growth than on the rate of investment, to do so through "intermediate" instabilities (of the rate of investment and of the real exchange rate), and in agricultural economies through their impact at the farmer level. Besides its negative effects on growth, vulnerability is assumed to increase aid effectiveness: the more the recipient country is vulnerable the more aid contributes to growth. Implications are drawn for aid allocation and aid design.

Suggested Citation

  • Patrick GUILLAUMONT, 2000. "On the Economic Vulnerability of Low Income Countries," Working Papers 200016, CERDI.
    • Handle: RePEc:cdi:wpaper:143
    as

    Download full text from publisher

    File URL: http://publi.cerdi.org/ed/2000/2000.16.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-179, May.
    2. Guillaumont, Patrick & Jeanneney, Sylviane Guillaumont & Brun, Jean-Francois, 1999. "How Instability Lowers African Growth," Journal of African Economies, Centre for the Study of African Economies, vol. 8(1), pages 87-107, March.
    3. Knudsen, Odin K. & Yotopoulos, Pan A., 1976. "A Transitory Income Approach to Export Instability," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 15(1), pages 1-18.
    4. Richard E. Just, 1974. "An Investigation of the Importance of Risk in Farmers' Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 14-25.
    5. Lim, David, 1980. "Income Distribution, Export Instability, and Savings Behavior," Economic Development and Cultural Change, University of Chicago Press, vol. 28(2), pages 359-364, January.
    6. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    7. Robert Lensink & Howard White, 2000. "Assessing Aid: A Manifesto for Aid in the 21st Century?," Oxford Development Studies, Taylor & Francis Journals, vol. 28(1), pages 5-18.
    8. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
    9. Rodrik, Dani, 1999. "Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses," Journal of Economic Growth, Springer, vol. 4(4), pages 385-412, December.
    10. Claudio Araujo, 1995. "Les producteurs brésiliens et l'instabilité des prix : Différences de comportement entre le Nord et le Sud," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 43(3), pages 443-461, November.
    11. Patrick Guillaumont, 1989. "Stratégies de développement et ouverture sur l'extérieur," African Development Review, African Development Bank, vol. 1(1), pages 40-57.
    12. J.-L Combes & P. Guillaumont & S. Guillaumont Jeanneney & P. Motel Combes, 2000. "Ouverture sur l'extérieur et instabilité des taux de croissance," Revue Française d'Économie, Programme National Persée, vol. 15(1), pages 3-33.
    13. Bussiere, Matthieu & Mulder, Christian, 2000. "Political Instability and Economic Vulnerability," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(4), pages 309-330, October.
    14. Guillaumont, Patrick & Guillaumont, Sylviane & Plane, Patrick, 1988. "Participating in African monetary unions: An alternative evaluation," World Development, Elsevier, vol. 16(5), pages 569-576, May.
    15. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    16. Patrick GUILLAUMONT, 1999. "Reducing Poverty By Aid Reallocation: Uncertainties And Alternative Assumptions," Working Papers 199928, CERDI.
    17. Dawe, David, 1996. "A new look at the effects of export instability on investment and growth," World Development, Elsevier, vol. 24(12), pages 1905-1914, December.
    18. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398, April.
    19. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1-1.
    20. Lin, William, 1977. "Measuring Aggregate Supply Response Under Instability," 1977 AAEA-WAEA Joint Meeting, July 31-August 3, San Diego, California 283678, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    21. Gyimah-Brempong, Kwabena, 1991. "Export Instability and Economic Growth in Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 39(4), pages 815-828, July.
    22. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
    23. Glezakos, Constantine, 1984. "Export Instability and Economic Growth: Reply," Economic Development and Cultural Change, University of Chicago Press, vol. 32(3), pages 615-623, April.
    24. Guillaumont, Patrick, 1987. "From export instability effects to international stabilization policies," World Development, Elsevier, vol. 15(5), pages 633-643, May.
    25. Moran, Cristian, 1983. "Export fluctuations and economic growth : An empirical analysis," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 195-218.
    26. William Lin, 1977. "Measuring Aggregate Supply Response under Instability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 59(5), pages 903-907.
    27. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
    28. Patrick Guillaumont & Catherine Bonjean, 1991. "Effects on agricultural supply of producer price level and stability with and without goods scarcity: The case of coffee supply in Madagascar," Journal of International Development, John Wiley & Sons, Ltd., vol. 3(2), pages 115-133.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sebastien Biass & Corine Frischknecht & Costanza Bonadonna, 2012. "A fast GIS-based risk assessment for tephra fallout: the example of Cotopaxi volcano, Ecuador-Part II: vulnerability and risk assessment," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 64(1), pages 615-639, October.
    2. Jean-Louis ARCAND & Patrick GUILLAUMONT & Sylviane GUILLAUMONT JEANNENEY, 2001. "Are Policy Reform and Growth in Africa Sustainable?," Working Papers 200105, CERDI.
    3. Sebastien Biass & Corine Frischknecht & Costanza Bonadonna, 2013. "A fast GIS-based risk assessment for tephra fallout: the example of Cotopaxi volcano, Ecuador," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 65(1), pages 497-521, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patrick GUILLAUMONT, 2001. "Ouverture, vulnérabilité et développement," Working Papers 200103, CERDI.
    2. Patrick GUILLAUMONT, 1999. "On The Economic Vulnerability Of Low Income Countries révisé, cf 2000.16," Working Papers 199916, CERDI.
    3. Patrick Guillaumont, 2009. "An Economic Vulnerability Index: Its Design and Use for International Development Policy," Oxford Development Studies, Taylor & Francis Journals, vol. 37(3), pages 193-228.
    4. Patrick Guillaumont, 2010. "Assessing the Economic Vulnerability of Small Island Developing States and the Least Developed Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 46(5), pages 828-854.
    5. Patrick GUILLAUMONT, 2007. "EVI and its Use. Design of an Economic Vulnerability Index and its Use for International Development Policy," Working Papers 200714, CERDI.
    6. Jean‐Louis Combes & Patrick Guillaumont, 2002. "Commodity Price Volatility, Vulnerability and Development," Development Policy Review, Overseas Development Institute, vol. 20(1), pages 25-39, March.
    7. Patrick Guillaumont, 2011. "EVI and its Use. Design of an Economic Vulnerability Index and its Use for International Development Policy," CERDI Working papers halshs-00557091, HAL.
    8. Jean-Louis COMBES & Patrick GUILLAUMONT, 2000. "Volatilité des prix des produits primaires, vulnérabilité et développement," Working Papers 200014, CERDI.
    9. Patrick Guillaumont, 2011. "An Economic Vulnerability Index: Its Design and Use for International Development Policy," CERDI Working papers halshs-00554328, HAL.
    10. Guillaumont, Patrick & Jeanneney, Sylviane Guillaumont & Brun, Jean-Francois, 1999. "How Instability Lowers African Growth," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(1), pages 87-107, March.
    11. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
    12. Dehn, Jan, 2000. "The effects on growth of commodity price uncertainty and shocks," Policy Research Working Paper Series 2455, The World Bank.
    13. Jan Dehn, 2000. "Commodity Price Uncertainty and Shocks: Implications for Economic Growth," Economics Series Working Papers WPS/2000-10, University of Oxford, Department of Economics.
    14. Patrick Guillaumont, 2010. "Assessing the Economic Vulnerability of Small Island Developing States and Least Developed Countries," Post-Print hal-00594797, HAL.
    15. Patrick Guillaumont, 2011. "Aid effectiveness for poverty reduction:macroeconomic overview and emerging issues," CERDI Working papers halshs-00554285, HAL.
    16. Mark McGillivray, 2003. "Efficacité de l'aide et sélectivité : vers un concept élargi," Revue d’économie du développement, De Boeck Université, vol. 11(4), pages 43-62.
    17. Kyriakos C. Neanidis & Dimitrios Varvarigos, 2005. "The Impact of Foreign Aid on Economic Growth: Volatility of Disbursements and Distribution of Receipts," Economics Discussion Paper Series 0533, Economics, The University of Manchester.
    18. Tony Addison & George Mavrotas & Mark McGillivray, 2005. "Development assistance and development finance: evidence and global policy agendas," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(6), pages 819-836.
    19. Pierre-Emmanuel Darpeix, 2019. "Literature review on the consequences of food price spikes and price volatility," Working Papers hal-02072329, HAL.
    20. Tony Addison & George Mavrotas & Mark McGillivray, 2005. "Aid, Debt Relief and New Sources of Finance for Meeting the Millennium Development Goals," WIDER Working Paper Series RP2005-09, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdi:wpaper:143. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vincent Mazenod (email available below). General contact details of provider: https://edirc.repec.org/data/ceauvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.