Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96327
Authors: 
Günther, Isabel
Maier, Johannes
Year of Publication: 
2013
Series/Report no.: 
WIDER Working Paper 2013/140
Abstract: 
In this paper we argue that the recent evidence on individuals' decision making is of high relevance for the measurement of poverty when switching from a static and certain to a dynamic and uncertain framework. The numerous proposed measures of multi-period poverty and vulnerability have until now not taken into account the insights from behavioural economics. Building on reference dependent utility models we propose a new measure of both (perceived) multi-period poverty and vulnerability, where the poverty status of an individual is not only a function of (expected) consumption levels but also of (expected) losses and gains in consumption. We demonstrate the implications of the proposed measures with a small illustrative example.
Subjects: 
multi-period poverty
vulnerability
reference dependent utility
prospect theory
loss aversions
JEL: 
D60
D81
I32
Document Type: 
Working Paper

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