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Measuring the impact of vulnerability on the number of poor: a new methodology with empirical illustrations

In: The Asian ‘Poverty Miracle’

Author

Listed:
  • Satya R. Chakravarty
  • Nachiketa Chattopadhyay
  • Jacques Silber
  • Guanghua Wan

Abstract

Given a poverty line, a person who is non-poor (poor) currently may not be treated as non-poor (poor) in a vulnerable situation. This chapter looks at the impact of vulnerability on the poverty line. The poverty line is adjusted in the presence of vulnerability such that the utility of a person at the current poverty line and that at the adjusted poverty line become identical. Using an additive model of vulnerability, it is shown that if the utility function obeys constant Arrow–Pratt absolute risk aversion, then the harmonized poverty line is a simple absolute augmentation of the current poverty line. On the other hand, under a multiplicative model of vulnerability with constant Arrow–Pratt relative risk aversion, the revised poverty line is a simple relative augmentation of the current poverty line. The chapter contains empirical illustrations which assume that constant relative risk aversion applies to countries involved in the Asia-Pacific region. Upward adjustment of the poverty line under increased vulnerability, as captured through the value of the risk aversion parameter, is also observed.

Suggested Citation

  • Satya R. Chakravarty & Nachiketa Chattopadhyay & Jacques Silber & Guanghua Wan, 2016. "Measuring the impact of vulnerability on the number of poor: a new methodology with empirical illustrations," Chapters, in: Jacques Silber & Guanghua Wan (ed.), The Asian ‘Poverty Miracle’, chapter 4, pages 84-117, Edward Elgar Publishing.
  • Handle: RePEc:elg:eechap:17203_4
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    References listed on IDEAS

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    More about this item

    Keywords

    Asian Studies; Development Studies; Economics and Finance;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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