Abstract

This study presented the definition of vulnerability at the household level as the probability that a household will find itself income poor in the future. The study adapted a methodology proposed by Chaudhuri (2000) for modeling vulnerability using cross-sectional data. Based from the results, the following are the main conclusions of the study: (a) In 1997, 38% of the population are vulnerable as compared to the official estimate of poverty incidence in the Philippines which is 27% at the national level. These estimates reveal that the observe incidence of poverty underestimates the fraction of the population that is vulnerable to poverty; (b) In general, results showed that regions with highest poverty incidences are also those with highest vulnerability incidences except for Metro Manila, Region 5, Autonomous Region of Muslim Mindanao (ARMM) and Caraga Region; (c) Metro Manila has the lowest rate of poverty incidence but it has the highest share of the population of vulnerable households, i.e., 16% of all vulnerable households reside in Metro Manila. This shows that vulnerability is also quite strong in urban areas and safety net measures must also be in place in urban areas; (d) As a result of the validation using the panel households from 1997 FIES, 1998 and 1999 APIS, the vulnerability estimates have a very strong predictive power of identifying poor households even for the next two years. Among the vulnerable households in 1997, 76% are identified poor households in 1998, 75 % are also poor in 1999, and 69% are poor both in 1998 and 1999.