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The Vulnerable Are Not (Necessarily) the Poor

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  • Sanghamitra Bandyopadhyay

Abstract

In this paper I examine the concept of "vulnerability" within the context of income mobility of the poor. While the concept of poverty is well developed, the concept of vulnerability is less established in the economic literature. I test for the dynamics of vulnerable households in the UK using Waves 1 - 12 of the British Household Panel Survey and find that, of three different types of risks for which I test, household-specific shocks and economy-wide aggregate shocks have the greatest impact on consumption, in comparison to shocks to the income stream. I find vulnerable households up to at least 10 percentile points above the poverty line. Savings and earnings from a second job are not significantly associated with smoothing consumption of all vulnerable households. The results strongly indicate that income transfers and benefits assist the vulnerable in smoothing consumption. Thus, traditional poverty alleviating policies are not likely to assist the vulnerable.

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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research in its series Working Papers with number 40.

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Date of creation: Oct 2012
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Handle: RePEc:cgs:wpaper:40

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Keywords: income variability; vulnerability; poverty; insurances;

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  1. Sanghamitra Bandyopadhyay & Frank A Cowell, 2007. "Modelling Vulnerability in the UK," STICERD - Distributional Analysis Research Programme Papers 89, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Dahl, Gordon B. & Lochner, Lance, 2012. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," IZA Discussion Papers 6613, Institute for the Study of Labor (IZA).
  3. Ligon, Ethan & Schechter, Laura, 2002. "Measuring Vulnerability," 2002 Annual meeting, July 28-31, Long Beach, CA 19899, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Jenkins, Stephen P., 2011. "Changing Fortunes: Income Mobility and Poverty Dynamics in Britain," OUP Catalogue, Oxford University Press, number 9780199226436, September.
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  7. Orazio Attanasio & Nicola Pavoni, 2008. "Risk Sharing in Private Information Models with Asset Accumulation: Explaining the Excess Smoothness of Consumption," Carlo Alberto Notebooks 103, Collegio Carlo Alberto.
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  20. Mary Jo Bane & David T. Ellwood, 1986. "Slipping into and out of Poverty: The Dynamics of Spells," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 1-23.
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  23. Glewwe, Paul & Hall, Gillette, 1998. "Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru," Journal of Development Economics, Elsevier, vol. 56(1), pages 181-206, June.
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