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Vulnerability in a Stochastic Dynamic Model

Author

Listed:
  • Chris Elbers

    (Faculty of Economics and Business Administration, Vrije Universiteit)

  • Jan Willem Gunning

    (Faculty of Economics and Business Administration, Vrije Universiteit)

Abstract

Most measures of vulnerability are a-theoretic and essentially static. In this paper we use a stochastic Ramsey model to find a household's optimal welfare and we measure vulnerability as the shortfall from the welfare attained if the household consumed permanently at the poverty line. The results indicate that vulnerability is very sensitive to the time horizon considered. We find that the accuracy of existing regression-based vulnerability measures can be greatly improved by including asset measures in the regression.

Suggested Citation

  • Chris Elbers & Jan Willem Gunning, 2003. "Vulnerability in a Stochastic Dynamic Model," Tinbergen Institute Discussion Papers 03-070/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20030070
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    Cited by:

    1. Md. Shafiul Azam & Katsushi S. Imai, 2009. "Vulnerability and Poverty in Bangladesh," ASARC Working Papers 2009-02, The Australian National University, Australia South Asia Research Centre.
    2. Ligon, Ethan A., 2010. "Measuring Risk by Looking at Changes in Inequality: vulnerability in Ecuador," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8vj75725, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Magrini, Emiliano & Montalbano, Pierluigi & Winters, L. Alan, 2018. "Households’ vulnerability from trade in Vietnam," World Development, Elsevier, vol. 112(C), pages 46-58.
    4. Kishtany, Naill & Alemayehu, Seyoum Taffesse, 2009. "Achieving The MDGs – a Note," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 18(1), pages 116-116, December.
    5. Alessandro Federici & Pierluigi Montalbano, 2012. "Macroeconomic volatility, consumption behaviour and welfare: A cross-country analysis," Working Paper Series 3612, Department of Economics, University of Sussex Business School.
    6. Antonio Acconcia & Maria Carannante & Michelangelo Misuraca & Germana Scepi, 2020. "Measuring Vulnerability to Poverty with Latent Transition Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 151(1), pages 1-31, August.
    7. 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.
    8. Ligon, Ethan, 2011. "Dynamics, risk, and vulnerability," CUDARE Working Papers 120423, University of California, Berkeley, Department of Agricultural and Resource Economics.
    9. 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.
    10. Tomoki Fujii, 2016. "Concepts and measurement of vulnerability to poverty and other issues: a review of literature," Chapters, in: Jacques Silber & Guanghua Wan (ed.), The Asian ‘Poverty Miracle’, chapter 3, pages 53-83, Edward Elgar Publishing.
    11. 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.
    12. David Bardey & Samir Kiuhan & Julio César Suárez, 2009. "Seguros de desempleo: revisión de literatura y propuesta para Colombia," Documentos de Trabajo 5739, Universidad del Rosario.
    13. Ibok, Otu W. & Osbahr, Henny & Srinivasan, Chittur, 2019. "Advancing a new index for measuring household vulnerability to food insecurity," Food Policy, Elsevier, vol. 84(C), pages 10-20.
    14. 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.
    15. Sayema Haque Bidisha & Tanveer Mahmood & Md. Biplob Hossain, 2021. "Assessing Food Poverty, Vulnerability and Food Consumption Inequality in the Context of COVID-19: A Case of Bangladesh," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(1), pages 187-210, May.
    16. 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.
    17. Mousumi Das, 2021. "Vulnerability to Food Insecurity: A Decomposition Exercise for Rural India using the Expected Utility Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 156(1), pages 167-199, July.

    More about this item

    Keywords

    vulnerability; expected poverty; risk; Ramsey model; consumption regressions;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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