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Can We Predict Vulnerability to Poverty?

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  • Zhang, Yuan
  • Wan, Guanghua

Abstract

There are alternative definitions of vulnerability to poverty. Most researchers prefer to define vulnerability 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 attempt to assess the extent to which we can measure vulnerability to poverty. The assessment is based on comparisons between predicted vulnerability and actually observed poverty. We find that the precision of prediction, first, varies depending on the vulnerability line; our results suggest setting the line at 50 per cent in order to improve predictive power. Second, precision depends on how permanent income is estimated. Assuming log-normal distribution of income, it is preferable to use past weighted average income as an estimate of permanent income rather than using regressions to gage permanent income. And third, prediction precision depends on the chosen poverty line. More accurate measurement of vulnerability to poverty is obtained with a higher poverty line of US$2 instead of US$1.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2008/rp2008-82.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number RP2008/82.

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Length: 14 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:unu:wpaper:rp2008-82

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Keywords: vulnerability; poverty; permanent income; transitory income;

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References

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  1. Gamanou, Gisele & Morduch, Jonathan, 2002. "Measuring Vulnerability to Poverty," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  3. Luc J. Christiaensen & Kalanidhi Subbarao, 2005. "Towards an Understanding of Household Vulnerability in Rural Kenya," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 14(4), pages 520-558, December.
  4. 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).
  5. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September.
  6. 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.
  7. McCulloch, Neil & Calandrino, Michele, 2003. "Vulnerability and Chronic Poverty in Rural Sichuan," World Development, Elsevier, vol. 31(3), pages 611-628, March.
  8. 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.
  9. Stefan Dercon & Pramila Krishnan, 2000. "Vulnerability, seasonality and poverty in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 25-53.
  10. Alwang, Jeffrey & Siegel, Paul B. & Jorgensen, Steen L., 2001. "Vulnerability : a view from different disciplines," Social Protection Discussion Papers 23304, The World Bank.
  11. Mohabbat, Khan A & Simos, Evangelos O, 1977. "Consumer Horizon: Further Evidence," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 851-58, August.
  12. Stefan Dercon, 2005. "Risk, Poverty and Vulnerability in Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 14(4), pages 483-488, December.
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Citations

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Cited by:
  1. Hardeweg, Bernd & Wagener, Andreas & Waibel, Hermann, 2013. "A distributional approach to comparing vulnerability, applied to rural provinces in Thailand and Vietnam," Journal of Asian Economics, Elsevier, vol. 25(C), pages 53-65.
  2. Novignon, Jacob, 2010. "Estimating household vulnerability to poverty from cross section data: an empirical evidence from Ghana," MPRA Paper 39900, University Library of Munich, Germany.
  3. Katsushi S. Imai & Xiaobing Wang & Woojin Kang, 2009. "Poverty and Vulnerability in Rural China: Effects of Taxation," The School of Economics Discussion Paper Series 0913, Economics, The University of Manchester.
  4. Celidoni, Martina, 2011. "Vulnerability to poverty: An empirical comparison of alternative measures," MPRA Paper 33002, University Library of Munich, Germany.

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