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Impact of shocks on the vulnerability to poverty: Consequences for development of emerging Southeast Asian economies (Phase 1, 2006 - 2009)

The German Research Foundation (DFG) in Bonn, Germany in 2006 has awarded a special research unit to the Universities of Hannover, Göttingen and Frankfurt. The subject of the project is the analysis of the role of shocks and risks for the development of poor countries and emerging market economies. Central to the analysis of these factors is the concept of vulnerability. While numerous research papers have been produced on this subject, to date the concept of vulnerability still lacks a comprehensive and empirically well-founded framework in the development economics literature.

Target countries of this research are Thailand and Vietnam. These two countries were chosen because they offer excellent conditions to undertake such research as they have past (and current) experience with high rates of economic growth and success in poverty reduction. However, they have also suffered from various types of shocks and have implemented crisis response strategies. Both countries, although to different degrees, show a growing regional inequality with a persistence of “pockets of poverty”. Most importantly, in both countries a fair amount of secondary data is available and competent local partners assure high quality research and diffusion of results.

To advance the vulnerability to poverty concept the project follows an integrated approach. Through interconnected research in different fields of economics, the determinants of vulnerability are investigated. Five interlinked sub-projects look at the role of macro and micro risks and shocks of vulnerability to poverty. Two sub projects, are so-called Base Projects. These two projects generate outputs which are needed by the three other sub-projects. The latter projects deal with vulnerability from a sectoral and regional perspective.

Base project No. 1 “Vulnerability and household dynamics” develops the theoretical and conceptual base of the vulnerability to poverty concept in order to facilitate the establishment of a sound empirical base of the factors that determine vulnerability. Complementary to that the second base project takes charge of the collection and management of the vulnerability database including secondary and primary data. Base project 2 is adding a spatial dimension to the analysis. Building on the results of the other sub-projects it will generate GIS-based maps of vulnerability for the six target provinces.

The three other projects deal with different aspects that play a role for vulnerability. They cover the field of (i) agriculture, (ii) financial institutions and (iii) regional economic development. In combination they provide the specific factors that influence vulnerability including macro and micro shocks specific to these fields. The sub-projects will follow the theoretical concept outlined by project 1 and will make use of the database service function provided by project 2.