EVI and its Use. Design of an Economic Vulnerability Index and its Use for International Development Policy

As an answer to a need expressed by the UN General Assembly an Economic Vulnerability Index (EVI) has been defined by the Committee for Development Policy. The present paper, which refers to this index, first examines how a structural economic vulnerability index can be designed, in particular for low income countries: it recalls the conceptual and empirical grounds of such an index, considers the structure of the present EVI, its sensitivity to methodological choices about averaging, as well as related possible improvements, and briefly compares levels and trends of EVI in various groups of countries, using a new data base of a "retrospective EVI". In a second part the paper examines how EVI can be used for international development policy, underlining two main purposes. The first one, for which EVI has been initially designed at the UN, is the identification of the Least Developed Countries (LDCs), allowed to receive some preferential treatment in aid and trade matters: EVI is, with income per capita and human capital, one of the three complementary criteria a country needs to meet to be included into the list of LDCs and consequently cannot be considered alone to avoid a graduation from the list. A second use would be to retain EVI as a criterion for aid allocation between developing countries, besides other and traditional criteria: we argue that such an inclusion is legitimate both for effectiveness and equity reasons. These two purposes are presented as complementary.