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Please do not quote HOUSEHOLD VULNERABILITY AND THE ASIAN CRISIS: THE CASE OF THAILAND

By Benu Bidani and World BankKaspar Richter and World Bank

Abstract

Abstract: The East Asian crisis has highlighted that households face large exposure to negative economic shocks, and has brought the issue of vulnerability to the attention of policy makers. This paper implements a methodology for the analysis of vulnerability in Thailand using nationally-representative cross-sectional household survey data for 1996, 1998, and 1999. Following Chaudhuri (2000), we define vulnerability as the ex-ante risk of future poverty. We apply the FGLS-estimation technique to yield consistent, and asymptotically efficient coefficients in mean and variance consumption regressions, which we use to calculate the probability of each household to be poor in the next period. We derive the vulnerability profile over time, compare it to the poverty profile, investigate the sensitivity of the results to the choice of the vulnerability threshold, and study the sources of vulnerability with decomposition analysis. The crisis has led to both higher poverty and vulnerability of the Thai population. The rise in poverty was largely due to an increase in the group of the “chronic ” rather than “transient ” poor, and vulnerability rose due to more “low mean ” vulnerability rather than higher “high volatility ” vulnerability. It also has produced a larger overlap between the groups of the poor and vulnerable. Variation in mean consumption levels account for the bulk of the differences in vulnerability levels. 1 We are very grateful to Shubham Chaudhuri for his inspiration and guidance, and to Luc Christiaensen, Gaurav Datt, Jyotsna Jalan and Tamar Manuelyan Atinc for very helpful comments. However, the authors alone are responsible for the views expressed in the paper. HOUSEHOLD VULNERABILITY AND THE ASIAN CRISIS: THE CASE OF THAILAND 1

Year: 2001
OAI identifier: oai:CiteSeerX.psu:10.1.1.194.5246
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