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Risk-adjusted poverty in Argentina: measurement and determinants

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  • Guillermo Cruces
  • Quentin Wodon

Abstract

This paper presents a methodology for adjusting measures of income and poverty for the risk faced by a household. The approach draws on the standard economic concept of risk aversion, and it is based on the intuition that households will prefer a steady stream of income to a variable one with the same mean. Relying on a Constant Relative Risk Aversion utility function, we use panel data for Argentina to compute risk-adjusted income and poverty measures. At the aggregate level, we find that taking risk into account substantially increases the poverty headcount. Moreover, a regression analysis suggests that many household characteristics are correlated not only with the average income of the household over time, but also with its variability.

Suggested Citation

  • Guillermo Cruces & Quentin Wodon, 2007. "Risk-adjusted poverty in Argentina: measurement and determinants," Journal of Development Studies, Taylor & Francis Journals, vol. 43(7), pages 1189-1214.
  • Handle: RePEc:taf:jdevst:v:43:y:2007:i:7:p:1189-1214
    DOI: 10.1080/00220380701526329
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    Cited by:

    1. Mussa, Richard, 2015. "A regression based model of average exit time from poverty with application to Malawi," MPRA Paper 65204, University Library of Munich, Germany.
    2. Ana Iturriza & Arjun S. Bedi & Robert Sparrow, 2011. "Unemployment Assistance and Transition to Employment in Argentina," Economic Development and Cultural Change, University of Chicago Press, vol. 59(4), pages 811-837.
    3. repec:ebl:ecbull:v:9:y:2003:i:3:p:1-12 is not listed on IDEAS
    4. Philippe Van Kerm, 2013. "Generalized measures of wage differentials," Empirical Economics, Springer, vol. 45(1), pages 465-482, August.
    5. Mussa, Richard, 2017. "Poverty in Malawi: Policy Analysis with Distributional Changes," MPRA Paper 75980, University Library of Munich, Germany.
    6. Guillermo Cruces & Quentin Wodon, 2003. "Argentina’s crises and the Poor, 1995-2002," IIE Journal, IIE Journal, Universidad Nacional de La Plata, vol. 0(1-2https:), pages 55-96, January-D.
    7. Beccaría, Luis Alberto & Groisman, Fernando, 2006. "Income instability, mobility and distribution in Argentina," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    8. James, Vanus, 2007. "New directions for development banking in the Caribbean: financing to take advantage of unlimited supplies of labour skills and entrepreneurship," Financiamiento para el Desarrollo 196, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    9. Inés Berniell & Dolores de la Mata & Matilde Pinto Machado, 2020. "The Impact of a Permanent Income Shock on the Situation of Women in the Household: The Case of a Pension Reform in Argentina," Economic Development and Cultural Change, University of Chicago Press, vol. 68(4), pages 1295-1343.
    10. Bebczuk, Ricardo N., 2007. "Access to credit in Argentina," Financiamiento para el Desarrollo 188, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    11. Fields, Gary S. & Sánchez Puerta, María Laura, 2010. "Earnings Mobility in Times of Growth and Decline: Argentina from 1996 to 2003," World Development, Elsevier, vol. 38(6), pages 870-880, June.
    12. Nouve, Kofi & Bambio, Yiriyibin & Kabore, Samuel & Wodon, Quentin, 2010. "Risque et mesures de la pauvreté rurale au Burkina Faso [Risk and Measures of Rural Poverty in Burkina Faso]," MPRA Paper 34374, University Library of Munich, Germany.
    13. World Bank, 2006. "Managing Risks in Rural Senegal : A Multi-Sectoral Review of Efforts to Reduce Vulnerability," World Bank Other Operational Studies 19467, The World Bank.
    14. Sandiford, Wayne, 2007. "Development banking in the Eastern Caribbean: the case of Saint Lucia and Grenada," Financiamiento para el Desarrollo 197, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    15. Mussa, Richard, 2015. "A joint analysis of correlates of poverty intensity, incidence, and gap with application to Malawi," MPRA Paper 65205, University Library of Munich, Germany.
    16. Stefan Dercon & Joseph S. Shapiro, 2007. "Moving On, Staying Behind, Getting Lost: Lessons on poverty mobility from longitudinal data," Economics Series Working Papers GPRG-WPS-075, University of Oxford, Department of Economics.
    17. Maria Emma Santos, 2012. "Measuring Chronic Poverty," OPHI Working Papers 52, Queen Elizabeth House, University of Oxford.
    18. Collister, Keith R., 2007. "A new approach to development banking in Jamaica," Financiamiento para el Desarrollo 193, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    19. Guillermo Cruces & Quentin T. Wodon, 2003. "Transient and chronic poverty in turbulent times: Argentina 1995-2002," Economics Bulletin, AccessEcon, vol. 9(3), pages 1-12.
    20. Mussa, Richard, 2017. "Contextual Effects of Education on Poverty in Malawi," MPRA Paper 75976, University Library of Munich, Germany.
    21. Ebru Çaglayan & Naime Irem Kosan & Melek Astar, 2012. "An Empirical Analysis of the Determinants of Household Poverty in Turkey," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 181-191, March.

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    More about this item

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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