Measuring Vulnerability to Poverty

In this paper, using Cote d'Ivoire 1985-88 data, the authors focus only on vulnerability to low consumption. They restrict attention to measures that can be constructed using quantitative data drawn from large, representative household surveys.

Prior to building the conceptual framework, they review three important data problems:

• Attrition: Biases emerging due to households leaving the panel;
• Changing household consumption: Changes due to family splits, migration, births or arrival of relatives;
• Measurement Error: Errors in forming measures of consumption aggregates, inappropriate price deflations, inappropriate deflations for household size, matching households in different waves of panel data.

They examine the existing frameworks such as the Expected Utility Theory, Mobility Measurement. They then propose a new framework that combines elements of Monte Carlo simulations with bootstrap to generate a distribution of possible future outcomes for households. This is based on their observed characteristics and observed consumption fluctuations of similar households.

The authors believe that while their approach can accommodate alternative poverty measures, it cannot resolve the deeper conceptual issues regarding trade offs between the winners and the losers involved.