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Measuring Vulnerability

Author

Listed:
  • Ethan Ligon

    (University of California, Berkeley)

  • Laura Schechter

    (University of California, Berkeley)

Abstract

Traditional poverty measures neglect several important dimensions of household welfare. In this paper we construct a measure of "vulnerability" which allows us to quantify the welfare loss associated with poverty as well as the loss associated with any of a variety of different sources of uncertainty. Applying our measure to a panel dataset from Bulgaria in 1994, we find that poverty and risk play roughly equal roles in reducing welfare. Aggregate shocks are more important than idiosyncratic sources of risk, but households headed by an employed, educated male are less vulnerable to aggregate shocks than are other households. Copyright Royal Economic Society 2003

Suggested Citation

  • Ethan Ligon & Laura Schechter, 2003. "Measuring Vulnerability," Economic Journal, Royal Economic Society, vol. 113(486), pages 95-102, March.
    • Handle: RePEc:ecj:econjl:v:113:y:2003:i:486:p:c95-c102
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    References listed on IDEAS

    as
    1. Ravallion, Martin, 1988. "Expected Poverty under Risk-Induced Welfare Variability," Economic Journal, Royal Economic Society, vol. 98(393), pages 1171-1182, December.
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    7. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
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    12. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    13. Ethan Ligon & Laura Schechter, 2002. "Measuring Vulnerability: The Director's Cut," WIDER Working Paper Series DP2002-86, World Institute for Development Economic Research (UNU-WIDER).
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