Building Resilience against Adverse Shocks: What are the determinants of vulnerability and resilience?

This paper proposes a simple way to measure livelihood diversification, and uses this measure together with income levels to classify Bolivian households by level of vulnerability. Regression analysis is then carried out to determine the factors and strategies associated with high resilience or high vulnerability. The results show that the single most important strategy for resilience is to have a working and income earning spouse in the household. This is still much too uncommon in Bolivia. A second important factor is the age of the head of household. Young families are considerably more vulnerable than more mature families, as they have not had time to build up assets that can provide alternative sources of livelihood. One of the most surprising results of the study is that urban households are considerably more vulnerable to adverse shocks than rural households, whereas gender and ethnicity are irrelevant. The paper finishes with a comprehensive list of policy recommendations.