Measuring Vulnerability to Poverty: A Unified Framework

In this paper, we provide a unified analytical framework to measure vulnerability to poverty. We conceptualise vulnerability as arising out of different shocks which makes it more intuitive and appealing. Our focus is on understanding impacts of shocks on income, both at the individual and societal level. We will mainly discuss conceptual issues around measuring vulnerability along with suggestions for empirical methods to estimate the level of vulnerability. We combine the literature on poverty measurement and decision making under uncertainty to provide a novel way of understanding and measuring vulnerability to poverty. Specifically, we employ a three step process where we first identify the vulnerable, second we calculate the vulnerability of each individual in the society and finally aggregate the vulnerability across all individuals to estimate the societal vulnerability. Our proposals also provide a broad theoretical framework to assess vulnerability under different information constraints.