Risk-adjusted poverty in Argentina: measurement and determinants

1 November 2006 | Publication

Risk-adjusted poverty in Argentina: measurement and determinants

- Publication corporate author (Institutional author): NU. CEPAL. División de Desarrollo Económico
- Physical description: 39 páginas.
- Publisher: ECLAC
- UN symbol (Signature): LC/L.2589-P
- Date: 1 November 2006
- ISBN: 9211216079

Abstract

Abstract This paper presents a methodology for adjusting measures of income and poverty for the risk faced by a household. The approach draws on the standard economic concept of risk aversion, and it is based on the intuition that households will prefer a steady stream of income to a variable one with the same mean. Relying on a Constant Relative Risk Aversion utility function, we use panel data for Argentina to compute risk-adjusted income and poverty measures. At the aggregate level, we find that taking risk into account substantially increases the poverty headcount. Moreover, a regression analysis suggests that many household characteristics are correlated not only with the average income of the household over time, but also with its variability.