The Asian ‘Poverty Miracle’

The Asian ‘Poverty Miracle’

Impressive Accomplishments or Incomplete Achievements?

ADBI series on Asian Economic Integration and Cooperation

Edited by Jacques Silber and Guanghua Wan

Following rapid economic growth in recent decades, Asia and the Pacific experienced an impressive reduction in extreme poverty, but this drop was not uniform and achievements are still incomplete. Vulnerability to natural disasters, the increasing impact of climate change and economic crises should all be taken into account. There is also a need to consider the multidimensional nature of poverty and the non-uniformity of the decrease across different ethnic groups. This book explores the Asian ‘poverty miracle’ and argues for the development and use of an Asia-specific poverty line.

Chapter 4: Measuring the impact of vulnerability on the number of poor: a new methodology with empirical illustrations

Satya R. Chakravarty, Nachiketa Chattopadhyay, Jacques Silber and Guanghua Wan

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics


Given a poverty line, a person who is non-poor (poor) currently may not be treated as non-poor (poor) in a vulnerable situation. This chapter looks at the impact of vulnerability on the poverty line. The poverty line is adjusted in the presence of vulnerability such that the utility of a person at the current poverty line and that at the adjusted poverty line become identical. Using an additive model of vulnerability, it is shown that if the utility function obeys constant Arrow–Pratt absolute risk aversion, then the harmonized poverty line is a simple absolute augmentation of the current poverty line. On the other hand, under a multiplicative model of vulnerability with constant Arrow–Pratt relative risk aversion, the revised poverty line is a simple relative augmentation of the current poverty line. The chapter contains empirical illustrations which assume that constant relative risk aversion applies to countries involved in the Asia-Pacific region. Upward adjustment of the poverty line under increased vulnerability, as captured through the value of the risk aversion parameter, is also observed.

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