Estimation of Vulnerability to Poverty Using a Multilevel Longitudinal Model: Evidence from the Philippines

This study estimates household vulnerability in the Philippines using a three-level and longitudinal linear random-coefficient model whereby vulnerability is decomposed into idiosyncratic and covariate components. Our three-wave panel data covering the period 2003-2009 allow us to analyse poverty situations in both vulnerability and poverty persistence dimensions. A majority of the poor and a third of the non-poor are found to be vulnerable to unobservable shocks, while more susceptible to unobservable idiosyncratic shocks than to covariate shocks. Adequate safety nets should be provided for vulnerable households with less-educated and agriculturally-engaged or jobless heads, rural dwellers, or with more members and/or dependents.