Economists have traditionally used static poverty measures to estimate
well-being, target aid, and determine progress towards development
goals. This is useful as a starting point, and gives a good snapshot of
the household's situation at one point in time, but in the end, what we
care about is the standard of living of the household over its entire
lifetime. A household's well being depends not just on its expenditures
at one point in time, but on its average expenditures over its lifetime.
Because of this, researchers now want to measure chronic poverty, in
addition to static poverty. Because this is a newer concept, the
literature has not yet converged on one measure which is acceptable to
all, as, arguably, the literature on static poverty has. We argue that
using a measure of chronic poverty based on the average level of
expenditures still misses an important portion of economic well-being.
For Voices of the Poor, the 2000/01 World Development Report, the World
Bank interviewed tens of thousands of poor people in countries across
the globe. These poor people stated that part of what makes poverty so
un-bearable is the instability and unpredictability they face, leading
to a feeling of vulnerability. Thus, we propose a measure of chronic
poverty, which we call vulnerability, which incorporates the risk
households face as well as their average level of expenditures.
The majority of vulnerability measures proposed thus far are static
measures. (Elbers & Gunning (2006) is one exception.) Thus they are
backward-looking rather than forward-looking. In this paper we begin
with a static measure of vulnerability and analyze the South African
KIDS data using this measure. Then, we propose four di®erent ways in
which one could make the measure more forward looking. Lastly, we choose
one of these methods and apply it to the South African data.
Vulnerability as a Measure of Chronic Poverty [Draft], Chronic Poverty Research Centre (CPRC), Manchester, UK, 17 pp.