Profiling economic vulnerability and resilience conceptual underpinnings

Abstract

Studies on economic vulnerability and resilience indices undertaken so far focus on a cross-sectional approach, comparing one country with another in terms of a number of variables, with the aim of benchmarking countries within a global context. These indices are useful mainly for three purposes. One is to disseminate information on the issues of vulnerability and resilience because an index is a very good instrument for drawing attention to the issue being investigated. A second purpose is to help to develop a common language for discussion, because the derivation of indices requires quantification and hence, precise definitions of fundamental notions. The third is to promote the idea of integrated action because vulnerability and resilience indices are composite and therefore combine a number of factors thought to determine these conditions. It is, however, also true that for the purposes of policy formulation and implementation, benchmarking within an international context is often merely a starting point, which needs to be followed by more in-depth investigation of issues within the specific context of the country and its circumstances. Briguglio et al. (2008) argued that while the notions of economic vulnerability and resilience have been crucial towards promoting a better understanding of development issues of small states especially in relation to the success of some of them as compared to larger countries, the practical applicability of these notions within the context of policy-setting for an individual country must go beyond the construction of indices derived from internationally comparable data. An important limitation of cross-sectional approaches emanates from the fact that, in order to compare-one country with another, a variable within an index may be considered redundant, and thereby omitted, if it is highly correlated with another that is already included in the index. While this is a valid action within a benchmarking study, it may not be suitable for a study focusing on an individual country, where all aspects of vulnerability and resilience need to be studied, irrespective of whether they are correlated or otherwise. This chapter, based on Briguglio et al. (2008), describes a conceptual approach aimed at building a template of variables to be considered in the derivation of a vulnerability/ resilience profile for an individual country.