Expected Poverty Under Risk-Induced Welfare Variability

This paper examines the effects of risk-induced welfare variability on the expected value of a broad class of stochastic poverty measures. Theoretical conditions are derived for an increase in shared risk to increase expected poverty. The approach is applied to panel data for three villages in the semiarid tropics of India, where both risk and poverty are severe. The preferred welfare indicator, based on food consumption, suggests that variability had negligible effect on the proportion of the population who are poor. However, the poverty reduc tion benefits from stabilization policies are far from negligible when effects on persistent poverty are considered. Copyright 1988 by Royal Economic Society.