Vulnerability to Multidimensional Poverty and Risk Management of the Peasant Households in Extremely Poor Areas

Abstract: The extremely poor areas are the key areas which influence the progress and effectiveness of poverty alleviation in China. The important content of the future poverty alleviation work lies in preventing non-poor households from falling into poverty and preventing out-of-poverty households from returning to poverty. Based on the concepts of multidimensional poverty and vulnerability, this paper puts forward the concept of vulnerability to multidimensional poverty of peasant households, which is suitable for explaining the poverty in the extremely poor areas. The main difference between multidimensional poverty and vulnerability to multidimensional poverty is the existence of risks. Based on the classification of risk types, we find that households in extremely poor areas are affected by covariate risks and idiosyncratic risks. The covariate risks include natural risks, economic risks and environmental risks, while idiosyncratic risks include health risks and life cycle risks. In order to reduce the negative impact of risks and the vulnerability to multidimensional poverty of peasant households in extremely poor areas, it is necessary to build a risk management mechanism which involves households, communities, governments and social groups, takes the informal mechanism and security mechanism provided by government as the main parts and the market-based insurance mechanism as the supplementary element.