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Can We Predict Vulnerability to Poverty?

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  • Zhang, Yuan
  • Wan, Guanghua

Abstract

There are alternative definitions of vulnerability to poverty. Most researchers prefer to define vulnerability as the probability of a household or individual falling into poverty in the future. Based on this definition and using household survey panel data from rural China, this paper attempt to assess the extent to which we can measure vulnerability to poverty. The assessment is based on comparisons between predicted vulnerability and actually observed poverty. We find that the precision of prediction, first, varies depending on the vulnerability line; our results suggest setting the line at 50 per cent in order to improve predictive power. Second, precision depends on how permanent income is estimated. Assuming log-normal distribution of income, it is preferable to use past weighted average income as an estimate of permanent income rather than using regressions to gage permanent income. And third, prediction precision depends on the chosen poverty line. More accurate measurement of vulnerability to poverty is obtained with a higher poverty line of US$2 instead of US$1.

Suggested Citation

  • Zhang, Yuan & Wan, Guanghua, 2008. "Can We Predict Vulnerability to Poverty?," WIDER Working Paper Series 082, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2008-82
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    References listed on IDEAS

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    Cited by:

    1. Novignon, Jacob, 2010. "Estimating household vulnerability to poverty from cross section data: an empirical evidence from Ghana," MPRA Paper 39900, University Library of Munich, Germany.
    2. Celidoni, Martina, 2011. "Vulnerability to poverty: An empirical comparison of alternative measures," MPRA Paper 33002, University Library of Munich, Germany.
    3. Martina Celidoni, 2013. "Vulnerability to poverty: an empirical comparison of alternative measures," Applied Economics, Taylor & Francis Journals, vol. 45(12), pages 1493-1506, April.
    4. Katsushi Imai & Xiaobing Wang & Woojin Kang, 2010. "Poverty and vulnerability in rural China: effects of taxation," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 8(4), pages 399-425.
    5. Zereyesus, Yacob A. & Embaye, Weldensie T. & Tsiboe, Francis & Amanor-Boadu, Vincent, 2017. "Implications of Non-Farm Work to Vulnerability to Food Poverty-Recent Evidence From Northern Ghana," World Development, Elsevier, vol. 91(C), pages 113-124.
    6. Bronfman, Javier, 2014. "Measuring Vulnerability to Poverty in Chile Using the National Socio Economic Characterization Panel Survey for 1996, 2001, 2006," MPRA Paper 62689, University Library of Munich, Germany.
    7. Hardeweg, Bernd & Wagener, Andreas & Waibel, Hermann, 2013. "A distributional approach to comparing vulnerability, applied to rural provinces in Thailand and Vietnam," Journal of Asian Economics, Elsevier, vol. 25(C), pages 53-65.
    8. Bronfman, Javier & Floro, Maria, 2014. "How well has the Social Protection Scheme Reduced Vulnerability in Chile?," MPRA Paper 63255, University Library of Munich, Germany.

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    Keywords

    vulnerability; poverty; permanent income; transitory income;

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