Vulnerability to poverty in Latin America: empirical evidence from cross-sectional data and robustness analysis with panel data

The risk of being poor and the actual state of poverty are two related but separated phenomenons. This document presents an analysis that aims at distinguishing the risk of future poverty from actual outcomes in Latin America. The paper introduces cross-sectional vulnerability estimates for 18 countries in the region, and compares their evolution with that of aggregate poverty rates.

Findings include: 

• the comparison of the evolution of poverty and vulnerability indicates the presence of similar patterns across all countries in the region
• measures of vulnerability seem to closely follow poverty levels; this fact can be seen in the region’s countries regardless whether welfare changed sharply or in a smooth way
• household vulnerability profiles indicate that this phenomenon in Latin America is correlated to residence in rural areas, with self-employed household heads with low educational levels
• differences between countries, both in levels and in these characteristics, are substantial, indicating the need of country-specific initiatives to reduce vulnerability
• the fact that that vulnerable households can be poor or non-poor suggests that cross-sectional poverty assessments may not be capturing the full extent of future welfare variability
  

The authors believe that vulnerability profiles should help to distinguish which of the poor households classified as not vulnerable are truly only experiencing a temporary poverty spell, and which ones are true classification errors. In addition, they deem that assessing the effectiveness of different deprivation indicators in targeting a wider set of dimensions is an interesting direction for future research.