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...

The effect of initial income inequality on growth is the subject of a large literature. We show, both analytically and with simulation experiments, that the same level of initial income inequality can be associated with very different income developments, depending on the source of the...

The paper discusses conditions to identify a stochastic Ramsey growth model from loglinear growth regressions.

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...