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Vulnerability, Unemployment and Poverty: A New Class of Measures, Its Axiomatic Properties and Application

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  • Basu, Kaushik

    (Cornell U)

  • Nolen, Patrick

    (Cornell U)

Abstract

Measures of unemployment and poverty have tended to focus solely on those currently unemployed or below the poverty line. This approach has ignored the members of society that are vulnerable to becoming unemployed or falling into poverty. Current literature in this area has implicitly assumed that since someone who is vulnerable experiences pain from the chance of becoming unemployed or falling into poverty, our standard measures of unemployment and poverty do not accurately account for this pain. The implication is that vulnerability is a 'bad' and policies should aim to reduce the number of people who are vulnerable in a society. In this paper we argue that, at the macro level, vulnerability can be viewed as a 'good' because, with unemployment remaining constant, the presence of vulnerable people implies that there must also exist currently unemployed people who expect to find work in the near future. And a society where unemployment is more equitably shared is better than a society where the burden of unemployment is carried by only a few. Given this view of vulnerability we then suggest a class of measures that, unlike the standard unemployment rate, account for the amount of vulnerability that exists in a society. We show some attractive axioms that our measure satisfies, fully characterize our measure and apply it to data from the U.S. and South Africa.

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Bibliographic Info

Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 04-07.

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Date of creation: May 2004
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Handle: RePEc:ecl:corcae:04-07

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References

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  1. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, Econometric Society, vol. 44(2), pages 219-31, March.
  2. Vani K. Borooah, 2002. "A Duration-Sensitive Measure of the Unemployment Rate: Theory and Application," ICER Working Papers, ICER - International Centre for Economic Research 19-2002, ICER - International Centre for Economic Research.
  3. 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, Elsevier, vol. 56(1), pages 181-206, June.
  4. Ligon, Ethan & Laura Schechter, 2002. "Measuring Vulnerability," Royal Economic Society Annual Conference 2002, Royal Economic Society 128, Royal Economic Society.
  5. Amin, Sajeda & Rai, Ashok S. & Topa, Giorgio, 2003. "Does microcredit reach the poor and vulnerable? Evidence from northern Bangladesh," Journal of Development Economics, Elsevier, Elsevier, vol. 70(1), pages 59-82, February.
  6. Gamanou, Gisele & Morduch, Jonathan, 2002. "Measuring Vulnerability to Poverty," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Fields, Gary S. & Ok, Efe A., 1996. "The Meaning and Measurement of Income Mobility," Journal of Economic Theory, Elsevier, Elsevier, vol. 71(2), pages 349-377, November.
  8. Sen, Amartya, 1974. "Informational bases of alternative welfare approaches : Aggregation and income distribution," Journal of Public Economics, Elsevier, Elsevier, vol. 3(4), pages 387-403, November.
  9. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, Econometric Society, vol. 52(3), pages 761-66, May.
  10. Pritchett, Lant & Suryahadi, Asep & Sumarto, Sudarno, 2000. "Quantifying vulnerability to poverty - a proposed measure, applied to Indonesia," Policy Research Working Paper Series 2437, The World Bank.
  11. Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, Econometric Society, vol. 46(5), pages 1013-24, September.
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Cited by:
  1. James Foster & Indranil Dutta & Ajit Mishra, 2010. "On Measuring Vulnerability to Poverty," Working Papers, The George Washington University, Institute for International Economic Policy 2010-13, The George Washington University, Institute for International Economic Policy.
  2. Cesar Calvo & Stefan Dercon, 2007. "Vulnerability to Poverty," CSAE Working Paper Series 2007-03, Centre for the Study of African Economies, University of Oxford.
  3. Calvo, Cesar, 2008. "Vulnerability to Multidimensional Poverty: Peru, 1998-2002," World Development, Elsevier, Elsevier, vol. 36(6), pages 1011-1020, June.
  4. Mohseni-Cheraghlou, Amin, 2013. "Labor markets and mental wellbeing: Labor market conditions and suicides in the United States (1979–2004)," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 45(C), pages 175-186.
  5. Nolen, Patrick, 2006. "Unemployment and Family-Values: A Household Distribution Sensitive Measure of Unemployment and Some Applications," Working Papers, Cornell University, Center for Analytic Economics 05-03rr, Cornell University, Center for Analytic Economics.

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