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

Author

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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.

Suggested Citation

  • Basu, Kaushik & Nolen, Patrick, 2004. "Vulnerability, Unemployment and Poverty: A New Class of Measures, Its Axiomatic Properties and Application," Working Papers 04-07, Cornell University, Center for Analytic Economics.
  • Handle: RePEc:ecl:corcae:04-07
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    References listed on IDEAS

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    Cited by:

    1. 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, vol. 45(C), pages 175-186.
    2. Indranil Dutta & James Foster & Ajit Mishra, 2011. "On measuring vulnerability to poverty," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(4), pages 743-761, October.
    3. Nolen, Patrick, 2006. "Unemployment and Family-Values: A Household Distribution Sensitive Measure of Unemployment and Some Applications," Working Papers 05-03rr, Cornell University, Center for Analytic Economics.
    4. Calvo, Cesar, 2008. "Vulnerability to Multidimensional Poverty: Peru, 1998-2002," World Development, Elsevier, vol. 36(6), pages 1011-1020, June.

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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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