Poverty, vulnerability, and reference dependent utility

Arbeitspapier

In this paper we argue that the recent evidence on individuals' decision making is of high relevance for the measurement of poverty when switching from a static and certain to a dynamic and uncertain framework. The numerous proposed measures of multi-period poverty and vulnerability have until now not taken into account the insights from behavioural economics. Building on reference dependent utility models we propose a new measure of both (perceived) multi-period poverty and vulnerability, where the poverty status of an individual is not only a function of (expected) consumption levels but also of (expected) losses and gains in consumption. We demonstrate the implications of the proposed measures with a small illustrative example.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Working Paper ; No. 2013/140

Classification and Topics

• Classification: Wirtschaft ; Welfare Economics: General ; Criteria for Decision-Making under Risk and Uncertainty ; Measurement and Analysis of Poverty
• Subject: multi-period poverty ; vulnerability ; reference dependent utility ; prospect theory ; loss aversions

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Günther, Isabel ; Maier, Johannes
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/96327
• Last update: 10.03.2025, 11:46 AM CET