Degrees of vulnerability to poverty: a low-income dynamics approach for Chile

Prieto Suarez, Joaquin (2023) Degrees of vulnerability to poverty: a low-income dynamics approach for Chile. International Inequalities Institute Working Paper (129). London School of Economics and Political Science, London, UK.

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Abstract

I propose an empirical framework to identify different degrees of vulnerability to poverty using two vulnerability lines that classify currently non-poor people into risk groups: high, moderate and low risk of falling into poverty in the next period. The latter corresponds to the income-secure middle class. My approach features two contributions. First, it extends the latest research on vulnerability to poverty, introducing a new subdivision among the vulnerable group that would be useful, in practice, for public policy objectives. Second, it uses two models to predict both poverty entry probability and household income as part of the estimation procedures. The former controls for initial conditions effects and attrition bias and the latter addresses the retransformation problem. I apply my approach to Chile using longitudinal data from the P-CASEN 2006–2009. The vulnerability cut-offs obtained (using the poverty line for upper-middle-income countries) are for the low vulnerability line $20.0 dollars per person per day and for the high vulnerability line $9.9 dollars pppd (both in 2011 PPP). My vulnerability lines differ significantly from those estimated in earlier research on vulnerability and the middle-class in Latin America. I argue that the previous research has underestimated the size of the population that is vulnerable to falling into poverty and has overestimated the growth of the middle-class. Misclassifying the vulnerable as middle-class limits their chances of accessing to anti-poverty protection policies.

Item Type:	Monograph (Working Paper)
Official URL:	https://www.lse.ac.uk/International-Inequalities/P...
Additional Information:	© 2024 The Author
Divisions:	International Inequalities Institute
Subjects:	H Social Sciences > HC Economic History and Conditions F History United States, Canada, Latin America > F1201 Latin America (General)
JEL classification:	N - Economic History > N0 - General > N00 - General D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
Date Deposited:	09 Feb 2024 16:18
Last Modified:	09 Feb 2024 16:24
URI:	http://eprints.lse.ac.uk/id/eprint/121993

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