Vulnerability to poverty in Fiji

Abstract

In the extant literature either income or consumption expenditures as measured over short periods of time have been regarded as proxies for the material well-being of households. However, economists have long recognized that a household's sense of well-being depends not just on its average income or expenditures, but also on the risks it faces. Hence vulnerability is a more satisfactory measure of welfare. In this paper we measure the extent of vulnerability as expected poverty, and examine the importance of its determinants, on the basis of a household survey for Fiji. We find that in Fiji, vulnerability (and poverty) is largely a rural phenomenon. Moreover, the distribution of vulnerability across different segments of the population can differ significantly from the distribution of poverty. In addition, there is a sizable fraction of the population Fiji observed to be non-poor but estimated to be vulnerable to poverty. Thus, poverty reduction strategies in Fiji need to incorporate not just alleviation efforts but also prevention.