Measuring Economic Insecurity in Rich and Poor Nations

Abstract

Worrying about possible future economic dangers subtracts from the present well-being of individuals, which is why affluent societies have complex systems of private insurance and public social protection to provide a degree of economic security. However, such protections are largely unavailable to the citizens of poor nations (i.e., most of humanity). How can one measure economic security in these very different contexts? This paper examines trends in the IEWB Economic Security Index for four affluent OECD countries and compares a cross-section of 70 rich and poor countries in 2007/08. To reflect better the reality of developing countries, it revises the IEWB index to: (1) include the volatility of food production in the risk of loss of livelihood; (2) adjust the risks of health care costs to consider the proportion of household spending on food (which is non-discretionary, and large in poor countries); and (3) add adult male mortality to the risk of divorce in calculation of the risk of single parent poverty.JEL Codes: H400, I3, I310

Economic Insecurity in Transition: A Primary Commodities Perspective

“…The existing definitions of economic insecurity have revolved around the notions of: (1) the likelihood or risk of an adverse event in one's life; (2) perceptions of this risk; (3) anxieties and concerns associated with this risk; and (4) the ability to cope with or to recover from the costly consequences if an adverse event takes place (Osberg, ; Osberg and Sharpe, ; Bossert and D'Ambrosio, ). Osberg and Sharpe () argue that economic insecurity deals primarily with the future (be it the perceived likelihood of adverse events or the associated anxieties), contrasting it with the analysis of poverty, which deals primarily with current levels of consumption or wealth. Although one would expect poverty and insecurity to be positively correlated, low income is not a necessary condition for insecurity.…”

“…There are several reasons why this is important. First, it is argued that economic insecurity is an integral part of individual well‐being: worrying about the future detracts from enjoyment of the present (Osberg, ; Osberg and Sharpe, ). Second, it is well established that different aspects of economic insecurity are linked to individual health, trust levels, work performance, as well as saving, education, and consumption behavior (Witte, ; Rocha et al ., ; Cheng and Chan, ; Guriev and Zhuravskaya, ; László et al ., ; Linz and Semykina, ).…”

“…Another dimension of the Human Rights approach to economic insecurity is based on the statement in the UN Universal Declaration of Human Rights that everyone has the right to security in the event of unemployment, sickness, disability, widowhood, and old age. Osberg and Sharpe (, , ) have concentrated on the likelihood of these adverse events to describe economic insecurity at the macro (country) level—one of the four elements forming the Index of Economic of Well‐Being (IEWB) for a particular country.…”

Is it vulnerability or economic insecurity that matters for health?

“…The former is known as vulnerability (Calvo and Dercon, 2005;Dercon, 2005;Dutta et al, 2011) and the latter as economic insecurity (Berloffa and Modena, 2012;Bossert and D'Ambrosio, 2013;Hacker, 2006;Hacker et al, 2010;Osberg and Sharpe, 2014). Despite important distinctions existing between these concepts, there are no works (to our knowledge) that explicitly contrast their health impacts and one must turn to more tangential literature to gauge the a priori plausibilities of each.…”

Economic Insecurity: Editors' Introduction

“…However, most of the world's population lives in poorer nations, where economic insecurity is arguably far more prevalent, since private insurance markets and the social protections of the welfare state are much less available. The third article, by Osberg and Sharpe (), therefore adjusts the standard Economic Insecurity Index (developed for OECD countries) to reflect the reality of developing countries by including measures of volatility of food production and household spending on food, and adding adult male mortality to the risk of divorce. The paper compares a cross‐section of 70 rich and poor countries in approximately 2007 and finds substantially different levels of economic insecurity across the rich and the poor world.…”