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Evaluating different approaches to estimating vulnerability

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  • Ligon, Ethan
  • Schechter, Laura

Abstract

A number of researchers have recently proposed a variety of different `vulnerability'measures designed to capture the welfare consequences of risk for poor households, and also proposed a variety of different approaches to estimating these various measures of household vulnerability. However, it's possible to `mix-and-match'estimators and measures. Here we conduct Monte Carlo experiments designed to explore the performance of different estimators with different measures, under different assumptions regarding the underlying economic environment. We find that when the environment is stationary, and consumption expenditures are measured without error, that the best estimator is one proposed by Chaudhuri (2001), regardless of what measure of vulnerability is employed. If the vulnerability measure is risk-sensitive, but consumption is measured with error, a simple estimator proposed by the authors(2003) generally performs best. However, when the distribution of consumption is non-stationary, a modification of an estimator proposed by Pritchett et al. (2000) performs best. Future research should focus on combining the efficiency of the Chauduri estimator with the good properties of the authors (in environments with measurement error), and Pritchett (in non-stationary environments) estimators. However, even with present technology estimating vulnerability is simple, and much more informative, and useful than are static poverty measures, provided one has at least two rounds of panel data.

Suggested Citation

  • Ligon, Ethan & Schechter, Laura, 2004. "Evaluating different approaches to estimating vulnerability," Social Protection and Labor Policy and Technical Notes 30159, The World Bank.
  • Handle: RePEc:wbk:hdnspu:30159
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    Citations

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    Cited by:

    1. Gaurav, Sarthak, 2015. "Are Rainfed Agricultural Households Insured? Evidence from Five Villages in Vidarbha, India," World Development, Elsevier, vol. 66(C), pages 719-736.
    2. Raghbendra Jha & Tu Dang, 2009. "Vulnerability to Poverty in select Central Asian Countries," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(1), pages 17-50, June.
    3. Emiliano Magrini & Mauro Vigani, 2016. "Technology adoption and the multiple dimensions of food security: the case of maize in Tanzania," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 8(4), pages 707-726, August.
    4. Katja Landau & Stephan Klasen & Walter Zucchini, 2012. "Measuring Vulnerability to Poverty Using Long-Term Panel Data," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 118, Courant Research Centre PEG.
    5. Stefan Dercon (QEH), "undated". "Vulnerability: a micro perspective," QEH Working Papers qehwps149, Queen Elizabeth House, University of Oxford.
    6. Md. Shafiul Azam & Katsushi Imai, 2009. "Vulnerability and Poverty in Bangladesh," The School of Economics Discussion Paper Series 0905, Economics, The University of Manchester.
    7. Montalbano, Pierluigi, 2011. "Trade Openness and Developing Countries' Vulnerability: Concepts, Misconceptions, and Directions for Research," World Development, Elsevier, vol. 39(9), pages 1489-1502, September.
    8. Stefan Dercon (QEH), "undated". "Risk, Growth and Poverty: what do we know, what do we need to know?," QEH Working Papers qehwps148, Queen Elizabeth House, University of Oxford.
    9. de la Fuente, Alejandro & Ortiz-Juarez, Eduardo & Rodriguez-Castelan, Carlos, 2015. "Living on the edge : vulnerability to poverty and public transfers in Mexico," Policy Research Working Paper Series 7165, The World Bank.
    10. 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.
    11. Kishtany, Naill & Alemayehu, Seyoum Taffesse, 2009. "Achieving The MDGs – a Note," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 18(1).
    12. Raghbendra Jha & Tu Dang & Yusuf Tashrifov, 2010. "Economic vulnerability and poverty in Tajikistan," Economic Change and Restructuring, Springer, vol. 43(2), pages 95-112, May.
    13. Luis López-Calva & Eduardo Ortiz-Juarez, 2014. "A vulnerability approach to the definition of the middle class," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(1), pages 23-47, March.
    14. Raghbendra JHA & Tu DANG & Krishna Lal SHARMA, 2009. "Vulnerability to poverty in Fiji," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 9(1).
    15. Raghbendra Jha & Tu Dang, 2008. "Vulnerability and poverty in Timor-Lesté," Departmental Working Papers 2008-11, The Australian National University, Arndt-Corden Department of Economics.
    16. Ligon, Ethan, 2006. "Poverty and the welfare costs of risk associated with globalization," World Development, Elsevier, vol. 34(8), pages 1446-1457, August.
    17. Witt, Rudolf & Waibel, Hermann, 2011. "Constraints to diversification of poor fishery-dependent households in Cameroon," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 6(2), September.
    18. Stefan Dercon & Joseph S. Shapiro, 2007. "Moving On, Staying Behind, Getting Lost: Lessons on poverty mobility from longitudinal data," Economics Series Working Papers GPRG-WPS-075, University of Oxford, Department of Economics.
    19. 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.
    20. Ligon, Ethan A., 2011. "Dynamics, risk, and vulnerability," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8kw7k2dz, Department of Agricultural & Resource Economics, UC Berkeley.
    21. Raghbendra Jha & Tu Dang, 2008. "Vulnerability to poverty in Papua New Guinea," Departmental Working Papers 2008-08, The Australian National University, Arndt-Corden Department of Economics.
    22. Povel, Felix, 2015. "Measuring Exposure to Downside Risk with an Application to Thailand and Vietnam," World Development, Elsevier, vol. 71(C), pages 4-24.
    23. Harttgen, Kenneth & Günther, Isabel, 2006. "Households' Vulnerability to Covariate and Idiosyncratic Shocks," Proceedings of the German Development Economics Conference, Berlin 2006 10, Verein für Socialpolitik, Research Committee Development Economics.
    24. Kenneth Harttgen & Isabel Günther, 2007. "Estimating Vulnerability to Covariate and Idiosyncratic Shocks," Ibero America Institute for Econ. Research (IAI) Discussion Papers 154, Ibero-America Institute for Economic Research.

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