Estimating Chinese Rural Households Vulnerability Based On Idiosyncratic And Covariate Shocks

As one of the three major economic problems in the world, it is necessary to make a reasonable plan for the poor. However, the traditional method of research about poverty is still a static judge whether the family is poor or not currently, according to this method to develop the poverty alleviation program will be lagging, because this static research will ignore the changes in poverty with time, it doesn’t consider the future benefits of family or future benefits may suffering from the risk of change or shock.In this paper, we use the theory of vulnerability to poverty to study the rural poverty in our county, which can not only consider the current poor families and individuals, but also predicting those families and individuals who are not poor currently may be poor in future,so government develop ex-ante and ex-post measures to help families get rid of poverty and prevent families from falling into poverty,so that the policy is more accurate and effective.In this paper, we use (VEP) theory to define and measure vulnerability to poverty, using CFPS (Chinese Family Dynamic Tracking Survey) to estimate the household’s per capita consumption, to establish a multilevel linear model, which is different from the previous standard least square method. This estimation method can take into account the random error and variable information of the family and village levels which is the starting point of this model, and the model can be used to determine the effect of different levels of different levels on the variation of different levels.In this paper, we consider that the family’s consumption is often affected by idiosyncratic and covariate shocks. In this paper, we study the relative impact of these two kinds of risks on the vulnerability to poverty. In the past, due to the lack of data on the idiosyncratic and covariate shocks, the majority of the literature is limited to one or several of the risks to the vulnerability. This paper uses the advantage of multilevel linear model to study these two risks. Finally, we show that covariate shock have a relatively high impact on rural families.The research ideas of this paper are as follows:Firstly, we use the multilevel linear model to estimate the mean value of the per capita household consumption (that is, the forecast value of the family’s per capita consumption) by the number of households in 2010. At the same time, we can get the random error terms (i.e., each of the family level and village level). Then we use the least square method to estimate the idiosyncratic variance covariate variance and total variance. Then we can calculate the impact of the idiosyncratic and covariate shocks on vulnerability, and analyze the relationship between poverty and poverty, and specific to a single family to discuss the causes of vulnerability to poverty. There are two kinds of the origin of the vulnerable families:one is high volatility (HV); the other is low consumption or income level (LM).The structure of this paper is as follows:The first chapter is the introduction, which introduces the research background and research situation, reviews the domestic and foreign research situation and the innovation of this paper;The second chapter summarizes the definition of the three kinds of vulnerability to poverty, and introduces the definition of the idiosyncratic and covariate shocks;The third chapter is about the methodology of poverty vulnerability;in this section, the paper elaborates on the method of VEP measure, the theory of multilevel linear model and the estimation method of the risk;the fourth chapter is the empirical analysis;in the fifth chapter, the results of the calculation and the reasons for the vulnerability of the family are explained;the sixth chapter is the conclusion of this paper and the relevant policy recommendations, the innovations and deficiencies of this article.