Assessing household vulnerability to poverty from cross-sectional data: A methodology and estimates from Indonesia

A household's observed poverty status is an ex-post measure of a household's well-being (or lack thereof). But for thinking about forward-looking anti-poverty interventions that aim to prevent rather than alleviate poverty, what really matters is the vulnerability of households to poverty, i.e., the risk that a household will, if currently non-poor, fall below the poverty line, or if currently poor, will remain in poverty. Ideally, vulnerability at the household level would be estimated with panel data of sufficient length and richness. However, such data are rare, especially in poor, developing economies. We argue in this paper that despite the limitations of purely cross-sectional data, an analysis of these data can potentially be informative. We lay out a simple and fairly flexible methodology for empirically assessing household vulnerability to poverty using cross-sectional survey data, and demonstrate the uses and limitations of the proposed methods through a case study using data from the December 1998 mini-SUSENAS survey from Indonesia.