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Title:Households' Vulnerability to Covariate and Idiosyncratic Shocks PDF Logo
Authors:Harttgen, Kenneth
Günther, Isabel
Issue Date:2006
Series/Report no.:Proceedings of the German Development Economics Conference, Berlin 2006 / Verein für Socialpolitik, Research Committee Development Economics 10
Abstract:Households in developing countries are frequently hit by severe idiosyncratic and covariate shocks resulting in high consumption volatility. A household's currently observed poverty status might therefore not be a good indicator of the household's general poverty risk, or in other words its vulnerability to poverty. Although several measurements to analyze vulnerability to poverty have recently been proposed, empirical studies are still rare as the data requirements for these measurements are not met by the surveys that are available for most developing countries. In this paper, we propose a simple method to empirically assess the impact of idiosyncratic and covariate shocks on households' vulnerability, which can be used in a wide context as it relies on commonly available living standard measurement surveys. We apply our approach to data from Madagascar and show, that whereas covariate shocks have a substantial impact on rural households' vulnerability, urban households' vulnerability is largely determined by idiosyncratic shocks.
Subjects:Vulnerability to poverty
idiosyncratic and covariate shocks
multilevel modelling
JEL:I32
D60
Document Type:Conference Paper
Appears in Collections:Proceedings of the German Development Economics Conference, 2006 (Berlin)

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