IDEAS home Printed from
   My bibliography  Save this paper

Measuring Households' Vulnerability to Idiosyncratic and Covariate Shocks – the case of Bangladesh


  • Md. Shafiul Azam

    (Economics, School of Social Sciences, University of Manchester, UK)

  • Katsushi S. Imai

    (Economics, School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan))


The paper examines the level and sources of vulnerability in rural Bangladesh using a household survey. We use a simple two-level random intercept model to estimate expected mean and variance in consumption as well as to decompose the variance into idiosyncratic and covariate components. Our results indicate that both idiosyncratic and covariate shocks have considerable impact on household's vulnerability and idiosyncratic shocks seem to have greater impact on household's consumption vulnerability than the covariate shocks. Furthermore, idiosyncratic shocks appear to have a relatively higher impact on relatively well endowed (i.e. in terms of human capital, land holdings, activity status etc.), well off households and covariate shocks seem to have a relatively higher impact on poorer, less educated, household's vulnerability. Our results also reveal that rural vulnerability in Bangladesh is mainly poverty induced rather than risk induced. Around 78 per cent all who are vulnerable is accounted for by low expected mean consumption and only 22 per cent of them are due to high consumption volatility. Overall vulnerability in rural areas is estimated to be 50 per cent. The categorization of poverty into transient and chronic poverty is even more insightful. The study finds that those without education or agricultural households are likely to be the most vulnerable. The geographical diversity of vulnerability is considerable. It is suggested that ex ante measures to prevent households from becoming poor as well as ex post measures to alleviate those already in poverty should be combined.

Suggested Citation

  • Md. Shafiul Azam & Katsushi S. Imai, 2012. "Measuring Households' Vulnerability to Idiosyncratic and Covariate Shocks – the case of Bangladesh," Discussion Paper Series DP2012-02, Research Institute for Economics & Business Administration, Kobe University.
  • Handle: RePEc:kob:dpaper:dp2012-02

    Download full text from publisher

    File URL:
    File Function: First version, 2012
    Download Restriction: no

    References listed on IDEAS

    1. Cesar Calvo & Stefan Dercon, 2005. "Measuring Individual Vulnerability," Economics Series Working Papers 229, University of Oxford, Department of Economics.
    2. Duclos, Jean-Yves & Araar, Abdelkrim & Giles, John, 2010. "Chronic and transient poverty: Measurement and estimation, with evidence from China," Journal of Development Economics, Elsevier, vol. 91(2), pages 266-277, March.
    3. Paul Mosley & Robert Holzmann & Steen Jorgensen, 1999. "Social protection as social risk management: conceptual underpinnings for the social protection sector strategy paper," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(7), pages 1005-1027.
    4. Fafchamps, Marcel & Udry, Christopher & Czukas, Katherine, 1998. "Drought and saving in West Africa: are livestock a buffer stock?," Journal of Development Economics, Elsevier, vol. 55(2), pages 273-305, April.
    5. Dercon, Stefan, 2004. "Growth and shocks: evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 74(2), pages 309-329, August.
    6. Dercon, Stefan, 1996. "Risk, Crop Choice, and Savings: Evidence from Tanzania," Economic Development and Cultural Change, University of Chicago Press, vol. 44(3), pages 485-513, April.
    7. Hoddinott, John & Quisumbing, Agnes, 2003. "Methods for microeconometric risk and vulnerability assessments," Social Protection and Labor Policy and Technical Notes 29138, The World Bank.
    8. Raghav Gaiha & Katsushi Imai, 2004. "Vulnerability, shocks and persistence of poverty: estimates for semi-arid rural South India," Oxford Development Studies, Taylor & Francis Journals, vol. 32(2), pages 261-281.
    9. Stefan Dercon (QEH), "undated". "Vulnerability: a micro perspective," QEH Working Papers qehwps149, Queen Elizabeth House, University of Oxford.
    10. Gaiha, Raghav & Imai, Katsushi, 2008. "Measuring Vulnerability and Poverty: Estimates for Rural India," WIDER Working Paper Series 040, World Institute for Development Economic Research (UNU-WIDER).
    11. Chant, Sylvia, 2003. "New contributions to the analysis of poverty: methodological and conceptual challenges to understanding poverty from a gender perspective," Asuntos de Género 47, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    12. Ligon, Ethan & Schechter, Laura, 2004. "Evaluating different approaches to estimating vulnerability," Social Protection and Labor Policy and Technical Notes 30159, The World Bank.
    13. Patricia Justino & Julie Litchfield, 2003. "Poverty Dynamics in Rural Vietnam: Winners and Losers During Reform," PRUS Working Papers 10, Poverty Research Unit at Sussex, University of Sussex.
    14. 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.
    15. 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.
    16. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," World Bank Research Observer, World Bank Group, vol. 17(2), pages 141-166, September.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:spr:soinre:v:134:y:2017:i:1:d:10.1007_s11205-016-1419-x is not listed on IDEAS
    2. Azomahou T.T. & Yitbarek E., 2015. "Poverty persistence and informal risk management: Micro evidence from urban Ethiopia," MERIT Working Papers 006, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Murata, Akira & Miyazaki, Suguru, 2014. "Ex-post Risk Management Among Rural Filipino Farm Households," Working Papers 67, JICA Research Institute.
    4. Azeem, Muhammad Masood & Mugera, Amin W. & Schilizzi, Steven, 2016. "Poverty and vulnerability in the Punjab, Pakistan: A multilevel analysis," Journal of Asian Economics, Elsevier, vol. 44(C), pages 57-72.
    5. Rashida Haq, 2012. "Shocks as a Source of Vulnerability: An Empirical Investigation from Pakistan," Poverty and Social Dynamics Paper Series 2012:06, Pakistan Institute of Development Economics.
    6. Rashida Haq, 2015. "Shocks as a Source of Vulnerability: An Empirical Investigation from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(3), pages 245-272.
    7. Okello, Julius, 2016. "Analysis of Household Poverty and Household Vulnerability to Poverty: The Role of Social Protection Measures in Reducing Household Poverty and Vulnerability in Katakwi District-Uganda," Miscellaneous Papers 249337, Agecon Search.
    8. repec:eee:wdevel:v:102:y:2018:i:c:p:262-274 is not listed on IDEAS
    9. GRIES, Thomas & PALNAU, Irene, 2016. "Distress Beyond Poverty: Spatial Patterns And Geographic Aspects Of Vulnerability In Brazil," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 16(2), pages 53-70.

    More about this item


    Poverty; Vulnerability; Risks; Poverty dynamics; Bangladesh;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2012-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.