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Measuring Exposure to Downside Risk with an Application to Thailand and Vietnam

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  • Povel, Felix

Abstract

In this paper we propose a new measure of exposure to downside risk. Its reference point is the current standard of living of a household as opposed to other benchmarks such as the poverty line in the case of measures of vulnerability. Using panel data from Thailand and Vietnam we develop an empirical approach to quantify our measure. More precisely, we predict truly forward looking probabilities and deprivation indices of different states of the world and aggregate them to country specific measures of exposure to downside risk. We scrutinize the correlates of these measures in the periods 2007–08 and 2008–09 using regressions with household fixed effects. We examine vulnerability to poverty and “hybrid” vulnerability to poverty in an identical empirical framework. This allows us to draw conclusions with respect to the value added of our new measure. We find that the measure of exposure to downside risk indeed offers complimentary information that may be relevant from a policy perspective and recommend to incorporate its appraisal in holistic assessments of vulnerability and risk exposure.

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  • Povel, Felix, 2015. "Measuring Exposure to Downside Risk with an Application to Thailand and Vietnam," World Development, Elsevier, vol. 71(C), pages 4-24.
    • Handle: RePEc:eee:wdevel:v:71:y:2015:i:c:p:4-24
    DOI: 10.1016/j.worlddev.2013.11.006
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    4. César Calvo, 2016. "Vulnerability to Poverty: Theory," Working Papers 2016-3, Lima School of Economics.
    5. Magrini, Emiliano & Montalbano, Pierluigi & Winters, L. Alan, 2018. "Households’ vulnerability from trade in Vietnam," World Development, Elsevier, vol. 112(C), pages 46-58.
    6. Thang T. Vo, 2018. "Social capital and household vulnerability: New evidence from rural Vienam," WIDER Working Paper Series wp-2018-167, World Institute for Development Economic Research (UNU-WIDER).
    7. Liaqat Ali & Muhammad Kamran Naqi Khan & Habib Ahmad, 2020. "Financial Fragility of Pakistani Household," Journal of Family and Economic Issues, Springer, vol. 41(3), pages 572-590, September.
    8. Nguyen, Trung Thanh & Nguyen, Loc Duc & Lippe, Rattiya Suddeephong & Grote, Ulrike, 2017. "Determinants of Farmers’ Land Use Decision-Making: Comparative Evidence From Thailand and Vietnam," World Development, Elsevier, vol. 89(C), pages 199-213.
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    10. Mauricio Gallardo & María Emma Santos & Pablo Villatoro & Vicky Pizarro, 2021. "Measuring vulnerability to multidimensional poverty in Latin América," Asociación Argentina de Economía Política: Working Papers 4476, Asociación Argentina de Economía Política.
    11. Quang-Thanh Ngo & Thuy-Khanh Hong Thai & Van-Tien Cao & Anh-Tuan Nguyen & Ngoc-Hieu Hoang & Ngoc-Danh Nguyen, 2020. "Individual-level Employment Transitions in Rural Viet Nam," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 12(01), March.
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    13. Kulkarni, Kedar, 2021. "Quantifying Vulnerability of Crop Yields in India to Weather Extremes," 2021 Annual Meeting, August 1-3, Austin, Texas 313879, Agricultural and Applied Economics Association.
    14. Quang-Thanh Ngo, 2018. "Individual-level employment transitions in rural Vietnam," WIDER Working Paper Series 154, World Institute for Development Economic Research (UNU-WIDER).
    15. Barriga Cabanillas, Oscar & Bossuroy, Thomas & Corral Rodas, Paul Andres & Rodriguez Castelan, Carlos & Skoufias, Emmanuel, 2024. "Sustaining Poverty Gains: A Vulnerability Map to Guide Social Policy," IZA Discussion Papers 17193, Institute of Labor Economics (IZA).
    16. Thang Vo, 2018. "Social capital and household vulnerability: New evidence from rural Vietnam," WIDER Working Paper Series 167, World Institute for Development Economic Research (UNU-WIDER).
    17. Ngo, Thanh Quang & Luu, Khai Duc & Nguyen, Danh Ngọc & Bui, Thanh Xuan & Van, Sang Nguyen & Nguyen, Ky Tran, 2022. "Effects of Land Quality on Land Use: Farm-level Panel-data Evidence from Viet Nam," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 14(4), December.
    18. Azeem, Muhammad Masood & Mugera, Amin W. & Schilizzi, Steven, 2016. "Poverty and vulnerability in the Punjab, Pakistan: A multilevel analysis," Journal of Asian Economics, Elsevier, vol. 44(C), pages 57-72.
    19. Emiliano Magrini & Pierluigi Montalbano & L. Alan Winters, 2017. "Vulnerability from trade in Vietnam," Working Paper Series 2017, Department of Economics, University of Sussex Business School.
    20. Mauricio Gallardo, 2018. "Identifying Vulnerability To Poverty: A Critical Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 32(4), pages 1074-1105, September.

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