This paper shows how to take into account risk aversion when measuring poverty under income variability. An application to British panel data suggests that income and poverty comparisons between the self-employed and other groups of households are sensitive to assumptions on the degree of risk...

Income variablity reduces social welfare if individuals are risk averse, and it is likely to increase inequality if poorer households are more vulnerable to shocks. Using a simple method to estimate risk-adjusted measures of inequality and welfare and wage data from Mexico, this note shows that...