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Lower Partial Moments as a measure of vulnerability to poverty in Cameroon


  • Witt, Rudolf
  • Waibel, Hermann


In this paper the class of Lower Partial Moments (LPMs) is used for measuring vulnerability as downside risk of household income in rural Cameroon. This class of established and coherent risk measures has been shown to meet a number of desirable properties. Among others, the LPMs fulfill the focus axiom, and for order greater than zero they are in harmony with expected utility theory under the weak assumption of risk aversion. Through combining the vulnerability measure with a portfolio approach it is possible to distinguish different livelihood systems for which the poverty and vulnerability measures are the explicit result of stochastic distributions of single activities in the households' portfolio and their covariance structure. In particular we consider the four major income generating activities in the study area: Sorghum, millet and rice production, and fishing. The results suggest that in the study area fishermen are less affected by adverse effects on income than other livelihood systems, while rice growers are the poorest and most vulnerable. It is also shown that rice and millet growers are suffering from chronic poverty, while transient poverty is more prevalent among the group of sorghum growers and fishermen. This implication is further confirmed by assuming a moving target equal to the mean portfolio income for the calculation of LPMs. The results of the scenario analysis suggest that policy interventions aiming at a reduction of the covariation structure between income flows from different activities are quite promising.

Suggested Citation

  • Witt, Rudolf & Waibel, Hermann, 2009. "Lower Partial Moments as a measure of vulnerability to poverty in Cameroon," Hannover Economic Papers (HEP) dp-434, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  • Handle: RePEc:han:dpaper:dp-434

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    References listed on IDEAS

    1. Günther, Isabel & Harttgen, Kenneth, 2009. "Estimating Households Vulnerability to Idiosyncratic and Covariate Shocks: A Novel Method Applied in Madagascar," World Development, Elsevier, vol. 37(7), pages 1222-1234, July.
    2. Carsky, R. J. & Ndikawa, R. & Singh, L. & Rao, M. R., 1995. "Response of dry season sorghum to supplemental irrigation and fertilizer N and P on Vertisols in northern Cameroon," Agricultural Water Management, Elsevier, vol. 28(1), pages 1-8, August.
    3. Joyce T. Chen & C. B. Baker, 1974. "Marginal Risk Constraint Linear Program for Activity Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(3), pages 622-627.
    4. Robert Jarrow & Feng Zhao, 2006. "Downside Loss Aversion and Portfolio Management," Management Science, INFORMS, vol. 52(4), pages 558-566, April.
    5. Kurukulasuriya, Pradeep & Mendelsohn, Robert, 2008. "A Ricardian analysis of the impact of climate change on African cropland," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 2(1), March.
    6. Ethan Ligon & Laura Schechter, 2003. "Measuring Vulnerability," Economic Journal, Royal Economic Society, vol. 113(486), pages 95-102, March.
    7. Carlo Acerbi & Claudio Nordio & Carlo Sirtori, 2001. "Expected Shortfall as a Tool for Financial Risk Management," Papers cond-mat/0102304,
    8. Bruce A. McCarl & Xavier Villavicencio & Ximing Wu, 2008. "Climate Change and Future Analysis: Is Stationarity Dying?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(5), pages 1241-1247.
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    More about this item


    Vulnerability as expected poverty; Lower Partial Moments; portfolio theory; diversification; Sub Saharan Africa;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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