This paper analyses vulnerability in Fiji, the Kyrgyz republic, Papua New Guinea and Vanuatu. In incorporating measures of vulnerability there is no major departure from the perspective of MDG 1 Analyses of vulnerability, like that in the present paper, emphasize the fact that the debates around poverty-growth elasticities are premised on the assumption of a state of world without any risks and uncertainties. In the real world in which the poor actually live they are subject to risks - both general and idiosyncratic - which affect their welfare. Thus poverty should not be viewed in static terms but within a framework that allows for changing states of the world. Nor should the possibility of reaching MDG1 be viewed simply as a matter of extrapolating from existing poverty levels using such computed growth poverty elasticities. Such a strategy runs the risk of becoming a statistical artefact with little relevance to the welfare of the poor. This paper begins by briefly surveying the empirical literature on vulnerability. It makes a distinction between vulnerability measures based on household level data and measures based on aggregate data. Since household level data are not available for these countries this paper provides measures of vulnerability and quantifies certainty equivalent consumption growth for these countries over the recent past. It then projects from computed growth rates of consumption and their corresponding certainty equivalent magnitudes to understand some implications of such vulnerability for reaching the poverty related MDG (MDG1). It is discovered that certainty equivalent consumption growth is much lower than average real per capita consumption growth indeed, in some cases, it is negative. This performance is linked to the incidence of aggregate shocks in these economies - particularly in the 1990s. Based on these trends it is concluded that real consumption per capita by 2015 would be lower in all four countries than what is required to attain MDG1.
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Paper provided by Australian National University, Economics RSPAS in its series Departmental Working Papers with number
2006-05.
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