Measuring vulnerability to poverty: A unified framework

The focus of this chapter is on understanding the impacts of shocks on income, both at the individual and societal level. The chapter mainly discusses conceptual issues around measuring vulnerability along with suggestions for empirical methods to estimate the level of vulnerability. The chapter adapts the existing literature in poverty measurement and decision making under uncertainty to measuring vulnerability to poverty. Specifically, a three step process is employed where first the vulnerable are identified, second the vulnerability of each individual in the society is calculated and finally the vulnerability across all individuals is aggregated to estimate the societal vulnerability. In this framework vulnerability is conceptualized as arising out of different shocks which makes it more intuitive and appealing. The chapter also provides a broad theoretical framework to assess vulnerability under different information.