Degrees of vulnerability to poverty

Working Paper 2024-666

Abstract

I extend recent research that defines the middle class using a vulnerability threshold by introducing a new subdivision of the vulnerable group that would be useful in practice for public policy objectives. 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. I apply my approach to Chile using longitudinal data from the PCASEN 2006–2009. The resulting vulnerability cut-offs (using the upper-middle-income country poverty line) are $20.0 per person per day for the low vulnerability line and $9.9 pppd for the high vulnerability line (both in 2011 PPP). I argue that previous research has underestimated the size of the population at risk of falling into poverty and overestimated the growth of the secure middle
class. Misclassifying the vulnerable as middle class limits their access to anti-poverty policies.

Authors: Joaquín Prieto.