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Vulnerability in a Stochastic Dynamic Model

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Author Info

  • Chris Elbers

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit)

  • Jan Willem Gunning

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit)

Abstract

Most measures of vulnerability are a-theoretic and essentially static. In this paper we use a stochastic Ramsey model to find a household's optimal welfare and we measure vulnerability as the shortfall from the welfare attained if the household consumed permanently at the poverty line. The results indicate that vulnerability is very sensitive to the time horizon considered. We find that the accuracy of existing regression-based vulnerability measures can be greatly improved by including asset measures in the regression.

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File URL: http://papers.tinbergen.nl/03070.pdf
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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-070/2.

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Date of creation: 11 Sep 2003
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Handle: RePEc:dgr:uvatin:20030070

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Web page: http://www.tinbergen.nl

Related research

Keywords: vulnerability; expected poverty; risk; Ramsey model; consumption regressions;

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Cited by:
  1. Kishtany, Naill & Taffesse, Alemayehu Seyoum, 2004. "Achieving the MDGs – A Note," MPRA Paper 26507, University Library of Munich, Germany.
  2. David Bardey & Samir Kiuhan & Julio César Suárez, 2009. "Seguros de desempleo: revisión de literatura y propuesta para Colombia," DOCUMENTOS DE TRABAJO 005739, UNIVERSIDAD DEL ROSARIO.
  3. Md. Shafiul Azam & Katsushi S. Imai, 2012. "Measuring Households' Vulnerability to Idiosyncratic and Covariate Shocks – the case of Bangladesh," Discussion Paper Series DP2012-02, Research Institute for Economics & Business Administration, Kobe University.
  4. Ligon, Ethan A., 2010. "Measuring Risk by Looking at Changes in Inequality: vulnerability in Ecuador," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8vj75725, Department of Agricultural & Resource Economics, UC Berkeley.
  5. Md. Shafiul Azam & Katsushi Imai, 2009. "Vulnerability and Poverty in Bangladesh," The School of Economics Discussion Paper Series 0905, Economics, The University of Manchester.
  6. Alessandro Federici & Pierluigi Montalbano, 2012. "Macroeconomic volatility, consumption behaviour and welfare: A cross-country analysis," Working Paper Series 3612, Department of Economics, University of Sussex.
  7. Ligon, Ethan A., 2011. "Dynamics, risk, and vulnerability," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8kw7k2dz, Department of Agricultural & Resource Economics, UC Berkeley.

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