Vulnerability to poverty: Methodological approaches

Transcription

1 Vulnerability to poverty: Methodological approaches Cesar A. Cancho Poverty and Equity GP Eastern Europe and Central Asia UNECE Conference Budva, September 27,

2 Outline 1. What do we mean by vulnerability to poverty 2. Defined as probabilities of falling back into poverty 3. Defined as perceptions of being vulnerable 4. Other definitions of middle class/vulnerability 5. Closing remarks 2

3 1. Vulnerability to Poverty: Ex-ante Poverty: Ex-post: consumption or income realized Vulnerability to Poverty: Ex-ante: those who are expected to be poor in the future Relevant for forward-looking anti-poverty interventions Dual-definition: Middle class. Information on who is poor today is good guide only if people are persistently poor. Need to define a new objective measure Different approaches to define vulnerability to poverty Evolving field of analysis 3

4 2. Defining vulnerability by probabilities of falling into poverty Lopez-Calva and Ortiz-Juarez (2014) Panel data information Middle Class: Households with less than 10% probabilities of falling into poverty Income level that corresponds to 10% probabilities of being poor in the future Measured over predicted income for stability Application for Latin American countries show line at $10/day per capita 2005 PPP Application for Georgia Poverty, Vulnerability and Middle Class, Georgia, Poor Vulnerable Middle Class Source: World Bank calculations based on Welfare Monitoring Survey, Poverty rates differ slightly from official ones due to the use of a different household survey. 4

5 3. Defining vulnerability by perceptions Ferreira et al. (2013) Subjective approach Distribution of self-reported class status in Mexico, 2007 Cross-sectional data Lowest income level around which more people regard themselves as middle class than as poor or lower class. Application to Latin America show very similar results for some countries Colombia Mexico Peru $9.3/day $9.5/day $10.5/day Source: Ferreira et al (2013) 5

6 4. Other definitions of middle class Some ad-hoc definitions of the middle class ignore the existence of a vulnerable groups, and may define thresholds too low for the region Banerjee and Duflo (2008): Ravallion (2010): $2 y i $10 a day $2 y i $13 a day Other ad-hoc definitions are based in benchmark countries: Kharas (2010): Milanovic and Yitzhaki (2002): $10 y i $100 a day $12 y i $50 a day Definitions of middle-class based on percentiles may implicitly define the vulnerable, but are not comparable across countries: Birdsall, Graham, and Pettinato (2000): 0.75*y(p50 ) y i 1.25*y(p50 ) Alesina and Perotti (1996): p40 p(yi ) p80 6

7 5. Closing remarks Vulnerability to poverty: ex-ante measure Definitions based on different methodologies can coincide (e.g. Latin America) Definitions based on global definitions may need to be adapted to country context Evolving area of analysis Refinements on methodologies Use of cross-sectional data More relevance as poverty in the Eastern Europe and Central Asia region continues falling 7

8 Thanks! Cesar A. Cancho Poverty and Equity Eastern Europe and Central Asia UNECE Conference Budva, September 27,

9 References Alesina, Alberto, and Roberto Perotti. (1996) Income Distribution, Political Instability, and Investment. European Economic Review 40 (6): Banerjee, Abhijit V., and Esther Duflo. (2008) What Is Middle Class about the Middle Classes around the World? Journal of Economic Perspectives 22 (2): Birdsall, Nancy, Carol Graham, and Stefano Pettinato. (2000) Stuck in the Tunnel: Is Globalization Muddling the Middle Class? Working Paper 14, Center on Social and Economic Dynamics, Brookings Institution, Washington, DC. Ferreira, Francisco H. G., Julian Messina, Jamele Rigolini, Luis-Felipe López-Calva, Maria Ana Lugo, and Renos Vakis. (2013) Economic Mobility and the Rise of the Latin American Middle Class. Washington, DC: World Bank. Haughton, Jonathan and Shahidur Khander (2009) Handbook on Poverty and Inequality. Washington, DC: World Bank. Kharas, Homi. (2010) The Emerging Middle Class in Developing Countries. Working Paper 285, Development Centre, Organisation for Economic Co-operation and Development, Paris. Lopez-Calva, L. F., & Ortiz-Juarez, E. (2014) A vulnerability approach to the definition of the middle class. The Journal of Economic Inequality, 12(1), Milanovic, Branko, and Shlomo Yitzhaki. (2002) Decomposing World Income Distribution: Does the World Have a Middle Class? Review of Income and Wealth 48 (2): Ravallion, Martin. (2010) The Developing World s Bulging (but Vulnerable) Middle Class. World Development 38 (4): World Bank (2017) South Caucasus in Motion: Economic and Social Mobility. Mimeo. 9