Vulnerable Households and Variable Incomes

In this paper we examine the concept of “vulnerability” within the context of income mobility of the poor. We test for the dynamics of vulnerable households in the UK using Waves 1 12 of the British Household Panel Study and find that, of three different types of risks that we test for, household-specific shocks and economy-wide aggregate shocks have the greatest impact on consumption, in comparison to shocks to the income stream. Acknowledgement 1 We are grateful to John Rigg for helpful discussions, and Elena Barcena and Guillermo Cruces for useful comments. Distributional Analysis Research Programme The Distributional Analysis Research Programme was established in 1993 with funding from the Economic and Social Research Council. It is located within the Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) at the London School of Economics and Political Science. The programme is directed by Frank Cowell. The Discussion Paper series is available free of charge. To subscribe to the DARP paper series, or for further information on the work of the Programme, please contact our Research Secretary, Leila Alberici on: Telephone: UK+20 7955 6674 Fax: UK+20 7955 6951 Email: [email protected] Web site: http://sticerd.lse.ac.uk/DARP © Authors: Sanghamitra Bandyopadhyay and Frank Cowell All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.