Estimating Vulnerability to Covariate and Idiosyncratic Shocks

Households in developing countries are frequently hit by severe idiosyncratic and covariate shocks resulting in high consumption volatility. A household’s currently observed poverty status might therefore not be a good indicator of the household’s general poverty risk, or in other words its vulnerability to poverty. Although several measurements to analyze vulnerability to poverty have recently been proposed, empirical studies are still rare as the data requirements for these measurements are often not met by the surveys that are available for developing countries. In this paper, we propose a simple method to empirically assess the impact of idiosyncratic and covariate shocks on households’ vulnerability, which can be used in a wide context as it relies on commonly available living standard measurement surveys. We apply our approach to data from Madagascar and show, that whereas covariate and idiosyncratic shocks have both a substantial impact on rural households’ vulnerability, urban households’ vulnerability is largely determined by idiosyncratic shocks.Vulnerability, idiosyncratic and covariate shocks, multilevel modelling

Growth and Poverty in Burkina Faso: A Reassessment of the Paradox

Previous poverty assessments for Burkina Faso were due to the neglect of some important methodological issues misleading and led to the so-called 'Burkinabè Growth-Poverty-Paradox', i.e. relatively sustained macro-economic growth, but almost constant poverty. We estimate that poverty significantly decreased between 1994 and 2003 at least on the national level, i.e. growth was in contrast to what previous poverty estimates suggested 'pro-poor'. However, we also demonstrate that between 1994 and 1998 poverty indeed increased despite a good macro-economic performance. This was due to a severe drought and a resulting profound deterioration of the purchasing power of the poor; an issue which was also overseen by previous studies.Poverty; Pro-poor growth; Differential inflation; Sub-Saharan Africa; Burkina Faso

Deadly Cities? A Note on Spatial Inequalities in Mortality in Sub-Saharan Africa

In this paper we analyze if an 'urban mortality penalty' exists for today's developing countries, repeating the history of industrialized nations during the 19th century. We analyze the Demographic and Health Survey (DHS) of 19 Sub-Saharan African countries for differences in child and adult mortality between rural and urban areas. Our findings indicate that child mortality is higher in rural areas for almost all countries. On average child mortality rates are 13.6 percent in rural areas and 'only' 10.8 percent in urban areas. In contrast, average urban adult mortality rates (on average 14.5 percent) have indeed exceeded rural adult mortality rates (on average 12.8 percent) in many of our sample countries in the 2000s. For many countries high child mortality pockets do, however, exist in slum areas within cities. Child mortality rates in slum areas are on average 1.65 times higher than in the formal settlements of cities, but still lower than in rural areas. --mortality,urban,slum,inequality

Households' Vulnerability to Covariate and Idiosyncratic Shocks

Households in developing countries are frequently hit by severe idiosyncratic and covariate shocks resulting in high consumption volatility. A household's currently observed poverty status might therefore not be a good indicator of the household's general poverty risk, or in other words its vulnerability to poverty. Although several measurements to analyze vulnerability to poverty have recently been proposed, empirical studies are still rare as the data requirements for these measurements are not met by the surveys that are available for most developing countries. In this paper, we propose a simple method to empirically assess the impact of idiosyncratic and covariate shocks on households' vulnerability, which can be used in a wide context as it relies on commonly available living standard measurement surveys. We apply our approach to data from Madagascar and show, that whereas covariate shocks have a substantial impact on rural households' vulnerability, urban households' vulnerability is largely determined by idiosyncratic shocks.Vulnerability to poverty,idiosyncratic and covariate shocks,multilevel modelling

Measuring Chronic Non-Income Poverty

An increasing interest in poverty dynamics has lately also led to an extensive literature on the analysis of chronic poverty. Based on Amartya Sen?s groundbreaking work on capabilities and functionings static poverty measures have long used non-income indicators. In contrast, measures of poverty dynamics - including chronic poverty – have in general conceptualised poverty only in an income dimension. Hence, this paper first critically discusses the conceptual and empirical potentials and limitations of analysing chronic poverty from a nonincome perspective. Second, it proposes methods to empirically measure chronic nonincome poverty, with an exploratory application to panel data from Vietnam from 1992 and 1997, which demonstrates that a range of useful insights can be generated from such an analysis. In particular, we find that the correlation between chronic income and non-income poverty is rather low which is mostly due to a low correlation between income and nonincome poverty in each period, while both move relatively closely over time. We also find a surprising amount of heterogeneity in static and dynamic non-income poverty within households. --

Competitive and Segmented Informal Labor Markets

It has been recently argued that the informal sector of the labor market in a developing economy shows a dual structure with one part of it being competitive to the formal sector and another part being the result of market segmentation. To test this hypothesis we formulate an econometric model which allows for a heterogeneous informal sector with unobserved individual a?liation and which takes into account selection bias induced by the employment decision of individ- uals. Our test results for the urban labor market in C^ote d'Ivoire indeed show existence of both competitive and segmented employment in the informal sector. --developing economy,informal labor market,segmentation,comparative advantage,selection bias,latent structure,finite mixture models

Competitive and Segmented Informal Labor Markets

It has recently been argued that the informal sector in developing countries shows a dual structure, with part of the informal sector being competitive to the formal sector and part of the informal sector being the result of market segmentation. We formulate an econometric model to test this hypothesis. The model allows for sector multiplicity with unobserved sector affiliation in the informal sector and takes into account sample selection bias induced by the employment decision of individuals. An estimation of the model for the urban labor market in C^ote d'Ivoire shows that the informal labor market is indeed composed of two segments with both competitive as well as segmented employment.informal labor market,segmentation,comparative advantage,selection bias,latent structure,finite mixture

Competitive and Segmented Informal Labor Markets

It has recently been argued that the informal sector of labor markets in de- veloping economies shows a dual structure with part of the informal sector being competitive to the formal sector and part of the informal sector being the result of market segmentation. To test this hypothesis, we formulate an econometric model which allows for a heterogeneous informal sector with unobserved individ- ual sector a±liation in the informal sector and which takes into account selection bias induced by the employment decision of individuals. Our empirical results for the urban labor market in C^ote d\'Ivoire show the existence of both competitive and segmented employment in the informal sector.developing economy, informal labor market, segmentation, comparative advantage, selection bias, latent structure, finite mixture models

The effect of water and sanitation on child health: evidence from the demographic and health surveys 1986-2007

Background Despite continued national and international efforts, access to improved water and sanitation remains limited in many developing countries. The health consequences of lacking access to water and sanitation are severe, and particularly important for child development. Methods To investigate the associations between child health and access to water and sanitation, we merged all available Demographic and Health Surveys (DHS) with complete birth histories and water and sanitation information. The merged data set of 171 surveys includes information on 1.1 million children under the age of 5 years in 70 low- and middle-income countries over the period 1986-2007. We used logistic models to estimate the effect of water and sanitation access on infant and child mortality, diarrhoea and stunting. Results Access to improved sanitation was associated with lower mortality (OR = 0.77, 95% CI 0.68-0.86), a lower risk of child diarorhea (OR = 0.87, 95% CI 0.85-0.90) and a lower risk of mild or severe stunting (OR = 0.73, 95% CI 0.71-0.75). Access to improved water was associated with a lower risk of diarrhoea (OR = 0.91, 95% CI 0.88-0.94) and a lower risk of mild or severe stunting (OR = 0.92, 95% CI 0.89-0.94), but did not show any association with non-infant child mortality (OR = 0.97, 95% CI 0.88-1.04). Conclusions Although our point estimates indicate somewhat smaller protective effects than some of the estimates reported in the existing literature, the results presented in this article strongly underline the large health consequences of lacking access to water and sanitation for children aged <5 years in low- and middle-income countrie

Analyzing Effectiveness of Development Aid Projects: Evaluation Ratings or Project Indicators?

Ongoing empirical research on the drivers of project-aid effectiveness relies on World Bank evaluation ratings across heterogeneous aid sectors. This leads to two problems. First, it is difficult to identify which dimension of project performance World Bank evaluation ratings are measuring precisely. Second, only project management variables, which are sector independent, can be included in the analysis. This study concentrating on an analysis of 150 water supply projects enables us to work with a more precise and objective performance measure by defining sector-specific indicators of improved water supply. Moreover, we are able to analyze the impact of project design in addition to project management. We find that evaluation ratings and indicators of improved water supply are positively but weakly correlated. Project management variables have a higher impact on evaluation ratings whereas project design variables have a higher impact on improving water supply to the target group. Various independent variables even change sign if indicators of improved water supply instead of evaluation ratings are chosen as a performance measure of project-aid effectiveness. Taking into account project design in addition to project management and country characteristics considerably increases the share of variation in project performance that can be explained