Methods for Microeconometric Risk and Vulnerability Assessments

Abstract

This paper summarizes the currently available quantitative tools that measure vulnerability. It reviews data options currently available to researchers and how these can be supplemented with other sources in order to conduct risk and vulnerability assessments. While one could use price, exchange rate, and balance of payments data to examine macroeconomic shocks, and rainfall data to assess the severity of droughts and floods, we are ultimately interested in their impacts on households - thus the emphasis on household data. It begins with a conceptual framework that links risk, risk management, and vulnerability. Building on this discussion, it describes techniques for measuring vulnerability within a population before discussing the data issues associated with their implementation. Building on this, it considers four questions: (1) Who is vulnerable? (2) What are the sources of vulnerability? (3) How do households cope with risk and vulnerability? and (4) What is the gap between risks and risk management mechanisms?

Keywords: risk, vulnerability, shocks

JEL Classification: O12