Poverty and vulnerability

A definition of stochastic poverty is set out in an attempt to formalise the difference between it and risk per se. Three additional factors contribute to poverty in poor countries: weather and price variability which are responsible for a large part of income fluctuations; financial institutions are poorly developed; and social insurance institutions are often weak. The problem of transitory poverty in rural India, much of which is due to stochastic poverty, is then addressed largely by increasing the extent and effectiveness of insurance mechanisms. -from Author