Measuring Vulnerability: The Director's Cut

vulnerability, risk, Bulgaria

Evaluating different approaches to estimating vulnerability

A number of researchers have recently proposed a variety of different `vulnerability'measures designed to capture the welfare consequences of risk for poor households, and also proposed a variety of different approaches to estimating these various measures of household vulnerability. However, it's possible to `mix-and-match'estimators and measures. Here we conduct Monte Carlo experiments designed to explore the performance of different estimators with different measures, under different assumptions regarding the underlying economic environment. We find that when the environment is stationary, and consumption expenditures are measured without error, that the best estimator is one proposed by Chaudhuri (2001), regardless of what measure of vulnerability is employed. If the vulnerability measure is risk-sensitive, but consumption is measured with error, a simple estimator proposed by the authors(2003) generally performs best. However, when the distribution of consumption is non-stationary, a modification of an estimator proposed by Pritchett et al. (2000) performs best. Future research should focus on combining the efficiency of the Chauduri estimator with the good properties of the authors (in environments with measurement error), and Pritchett (in non-stationary environments) estimators. However, even with present technology estimating vulnerability is simple, and much more informative, and useful than are static poverty measures, provided one has at least two rounds of panel data.Environmental Economics&Policies,Economic Theory&Research,Inequality,Poverty Lines,Consumption

Vote-Buying and Reciprocity

While vote-buying is common, little is known about how politicians determine who to target. We argue that vote-buying can be sustained by an internalized norm of reciprocity. Receiving money engenders feelings of obligation. Combining survey data on vote-buying with an experiment-based measure of reciprocity, we show that politicians target reciprocal individuals. Overall, our findings highlight the importance of social preferences in determining political behavior.vote-buying, reciprocity, redistributive politics, voting, social preferences

Brokering Votes With Information Spread Via Social Networks

Throughout much of the developing world, politicians rely on political brokers to buy votes prior to elections. We investigate how social networks help facilitate vote-buying exchanges by combining village network data of brokers and voters with broker reports of vote buying. We show that networks diffuse politically-relevant information about voters to brokers who leverage it to target voters. In particular, we find that brokers target reciprocal voters who are not registered to their party and about whom they can hear more information through their social network. These results highlight the importance of information diffusion through social networks for vote buying and ultimately for political outcomes

Traditional Trust Measurement and the Risk Confound: An Experiment in Rural Paraguay

Play in the traditional trust experiment depends both on trust beliefs and on levels of risk aversion. We ran two experiments with a diverse set of subjects in fifteen villages of rural Paraguay, the traditional trust experiment and a new experiment measuring only risk aversion. We find that risk attitudes are highly predictive of play in the trust game. In addition, omitting risk aversion as a regressor in trust regressions signficiantly changes the coefficients of important explanatory variables such as gender and wealth. We also use data on income and bet choice to calculate players' coefficients of relative risk aversion.

Measuring Strategic Uncertainty in Coordination Games

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004This paper explores predictability of behavior in coordination games with multiple equilibria. In a laboratory experiment we measure subjects' certainty equivalents for three coordination games and one lottery. Attitudes towards strategic uncertainty in coordination games are related to risk aversion, experience seeking, gender and age. From the distribution of certainty equivalents among participating students we estimate probabilities for successful coordination in a wide range of coordination games. For many games success of coordination is predictable with a reasonable error rate. The best response of a risk neutral player is close to the global-game solution. Comparing choices in coordination games with revealed risk aversion, we estimate subjective probabilities for successful coordination. In games with a low coordination requirement, most subjects underestimate the probability of success. In games with a high coordination requirement, most subjects overestimate this probability. Data indicate that subjects have probabilistic beliefs about success or failure of coordination rather than beliefs about individual behavior of other players

Side-Payments and the Costs of Conflict

Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve the dispute before it occurs. The equilibrium of a conflict game with side-payments predicts that with binding offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30 % of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 87 % of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 39 % of gains come from avoided conflicts and 61 % from reduced conflict expenditures