Measuring Economic Insecurity
Article [Version of Record]
Is part ofCahier de recherche ; no. 2009-06.
Publisher(s)Université de Montréal. Département de sciences économiques.
We provide a systematic treatment of the notion of economic insecurity, assuming that an individual’s sentiment of insecurity depends on the current wealth level and its variations experienced in the past. We think of wealth as a comprehensive variable encompassing anything that may help in coping with adverse occurrences. The current wealth level could also be interpreted as incorporating the individual’s evaluation of future prospects. Variations in wealth experienced in the recent past are given higher weight than experiences that occurred in the more distant past. Two classes of measures are characterized with sets of plausible and intuitive axioms.