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Estimating household vulnerability to poverty from cross section data: an empirical evidence from Ghana

Novignon, Jacob (2010): Estimating household vulnerability to poverty from cross section data: an empirical evidence from Ghana.

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Background In many developing countries, policies aimed at improving welfare through poverty reduction tend to target the current poor to the neglect of the vulnerable. An understanding of household susceptibility to future poverty will be crucial for sustainable growth and development. The objective of the study is to assess ex-ante welfare through vulnerability to poverty estimates among households in Ghana and to examine the effect of various socioeconomic characteristics on vulnerability to poverty. Method The study uses cross section data from the fifth round of the Ghana Living Standards Survey (GLSS) with a nationally representative sample of 8,687 households from all administrative regions in Ghana. The study employs a three step Feasible Generalized Least Squares (FGLS) estimation procedure to estimate vulnerability to poverty and to model the effect of household socioeconomic status on expected future consumption and variations in future consumption. Results The results show that, about 56% of households in Ghana are vulnerable to poverty and this is significantly higher than observed poverty level of about 28%. While the Eastern region was found to have the highest average vulnerability of approximately 73%, the Upper West region had the least vulnerability with about 21% average vulnerability to poverty. Other regions with relatively high incidence of vulnerability to poverty include the Western region (70%) and the Volta region (69%). Vulnerability to poverty was estimated to be 61% among urban households and 25% among rural households. Moreover, household health status, household size and education attainments significantly influence vulnerability to poverty. Male headed households were found to be less vulnerable to future poverty. Conclusion The results suggest that poverty and vulnerability to poverty are independent concepts. This implies that policies directed towards poverty reduction need to take into account the vulnerability of current non-poor households. Also, various household characteristics should be considered in developing poverty reduction strategies.

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