Vulnerability to Poverty in Latin America. Evidence from Cross-Section and Panel Data

This document presents a discussion of vulnerability estimates – defined as the risk of being

poor in the future – in Latin American countries from both a conceptual and an empirical

perspective, based on recent developments in the distributive literature. The document

develops two main contributions. First, it presents cross-sectional vulnerability estimates

(and their evolution over time) for 18 countries in the region, and compares their evolution

with that of aggregate poverty rates. Second, based on longitudinal data for Argentina and

Chile, the document carries out a validation exercise to assess how vulnerability measures

fare as predictors of poverty at the aggregate and the micro levels, and compares their

performance to that of other deprivation indicators. The main findings indicate substantial

cross-country differences in vulnerability levels. Moreover, vulnerability measures provide

good estimates of aggregate poverty trends. However, the validation exercise indicates that

at the micro level there are sizeable misclassifications of households in terms of expected

poverty. These results imply that vulnerability estimates should be complemented with

information on shocks and aggregate trends for guiding focalised policy interventions