Modelling Vulnerability in the UK.

In this paper we examine the concept of "vulnerability" (Townsend 1994) within the context of income mobility of the poor. We test for the dynam- ics of vulnerable households in the UK using Waves 1 - 12 of the British Household Panel Survey and nd that, of three di¤erent types of risks that we test for, household-specic shocks and economy-wide aggregate shocks have the greatest impact on consumption, in comparison to shocks to the income stream. Quantile-specic estimates reveal specic quantiles, particu- larly those around the poverty line which are most susceptible to be vulner- able to shocks to the income stream. The estimates are found to be robust to household composition and year-specic shocks