Many existing measures of vulnerability lack a theoretical basis. In this paper we propose to measure vulnerability rigorously as the welfare of a household which solves an intertemporal optimisation model under risk.In such models, in essence a stochastic version of the Ramsey model, an...

Most measures of vulnerability are a-theoretic and essentially static. In this paper we use a stochastic Ramsey model to find a household's optimal welfare and we measure vulnerability as the shortfall from the welfare attained if the household consumed permanently at the poverty line. The...

There has been a revival of interest in the effect of risk on economic growth. We quantify both ex ante and ex post effects of risk using a stochastic version of the Ramsey model. We develop a simulation-based econometric methodology which allows us to estimate the model in the structural form...