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Impact of shocks on the vulnerability to poverty: consequences for development of emerging Southeast Asian economies

The German Research Foundation (DFG) in Bonn, Germany in 2006 has awarded a special research unit to the Universities of Hannover, Göttingen and Frankfurt. The subject of the project is the analysis of the role of shocks and risks for the development of poor countries and emerging market economies. Central to the analysis of these factors is the concept of vulnerability. While numerous research papers have been produced on this subject, to date the concept of vulnerability still lacks a comprehensive and empirically well-founded framework in the development economics literature (Phase 1, 2006 - 2009).

In the second phase (2010 - 2012) of the Research Unit, following the basic concept of the first phase, data collection was continued by another two panel waves. In addition, and based on the findings of phase 1, an expansion of the empirical data base was achieved by including household members who have migrated to urban areas. As shown by the results of phase 1 in emerging market economies members of rural households are highly mobile. Thus rural households in effect are often multi-locational households who have a base in the village while one or more, usually younger household members having migrated to the urban centres for employment. Here an unique opportunity exists to better understand the dynamics of poverty before, during and after crisis situations and thus to derive solid lessons how to reduce vulnerability in developing countries. Hence a four- year panel of some 4400 households in six provinces and an additional survey of some 2500 migrants, primarily in three main urban centres (Bangkok, Hanoi and Ho Chi Minh City) is deemed necessary to achieve this goal.

The expectation is that at the end of the proposed second phase an advanced vulnerability concept will be available that satisfies theoretical requirements and is empirically verified and thus serves as a basis to develop social protection policy concepts for emerging market economies. It is proposed that towards the end of the second phase in 2012, an international conference on vulnerability to poverty will be held in Hannover that can bring together high level scientists and development specialists and where the results of this research are presented to a wider audience.

Target countries of this research are Thailand and Vietnam. These two countries were chosen because they offer excellent conditions to undertake such research as they have past (and current) experience with high rates of economic growth and success in poverty reduction. However, they have also suffered from various types of shocks and have implemented crisis response strategies. Both countries, although to different degrees, show a growing regional inequality with a persistence of “pockets of poverty”. Most importantly, in both countries a fair amount of secondary data is available and competent local partners assure high quality research and diffusion of results.

To advance the vulnerability to poverty concept the project follows an integrated approach. Through interconnected research in different fields of economics, the determinants of vulnerability are investigated. Five interlinked subprojects look at the role of macro and micro risks and shocks of vulnerability to poverty. Two sub projects, are so-called Base Projects. These two projects generate outputs which are needed by the three other subprojects. The latter projects deal with vulnerability from a sectoral and regional perspective.

Base project No. 1 “Vulnerability and household dynamics” develops the theoretical and conceptual base of the vulnerability to poverty concept in order to facilitate the establishment of a sound empirical base of the factors that determine vulnerability. Complementary to that the second base project takes charge of the collection and management of the vulnerability database including secondary and primary data. Base project 2 is adding a spatial dimension to the analysis. Building on the results of the other subprojects it will generate GIS-based maps of vulnerability for the six target provinces.

The three other projects deal with different aspects that play a role for vulnerability. They cover the field of (i) agriculture, (ii) financial institutions and (iii) regional economic development. In combination they provide the specific factors that influence vulnerability including macro and micro shocks specific to these fields. The subprojects will follow the theoretical concept outlined by project 1 and will make use of the database service function provided by project 2.

 

Interview situation in the survey area

 

Watch our movie that provides an overview of the research group (in German, about 7 minutes):

(Windows Media, 17.6 MB)