chances‖ which determine their opportunities for income in the market, and identified the middle class as those owning skills and education. This approach has triggered an important interest in analyzing the link between class and economic vulnerability. In a recent study, Goldthorpe and McKnight (2004) show that class positions affect the risk and opportunities individuals face. Their analysis focuses on three classes of workers and their contracts (nonskilled workers with simple contracts, professional workers and managers with comprehensive and stable contracts, and intermediate workers with ―mixed‖ forms of contracts), as well as on three dimensions: economic security, economic stability and economic prospects. The main results from the empirical work show that, in terms of economic security, the type of the contracts held by non-skilled workers has a direct impact on the high risks of unemployment and job loss these workers face, relative to other classes. In this sense the ―commodifying‖ of labor and associated higher probability of unemployment and less security in terms of health and pensions, makes class a central element of economic vulnerability.

On the issue of vulnerability, there is vast literature discussing and measuring the concept. In economics this is mainly done from the perspective of poverty traps (Ligon and Schechter 2004; Hoddinott and Quisumbing 2003) and poverty dynamics (Dercon 2006, 2001; Elbers and Gunning 2003). In Dercon‘s work, the author develops a framework for analyzing poverty and its links with vulnerability focusing on households and distinguishing three levels: assets, incomes generated from these assets, and capabilities. The main argument is that transitions from one level to the next (i.e. the transformation of assets into incomes and in turn their transformation into well-being) involve different risks (environmental and health factors, market- and public-related risks), for which both household strategies and public and private actions try to cope.

The relevance in analyzing vulnerability is related to the growing interest in including the concept into the design and implementation of social development strategies. Under the normative assumption that vulnerability causes insecurity and a reduction of welfare, it should be a central component of public actions to ensure a minimum level of protection. In an empirical work using panel data for rural India, Gaiha and Imai (2008) employ a decomposition of both ex ante and ex post measures of vulnerability to aggregate and idiosyncratic risks. An important result is that small farmers are vulnerable to idiosyncratic risks, which cause them to reduce their levels of consumption. Furthermore, vulnerability must be viewed as a broadening area for public intervention (that goes beyond static poverty status) given the presence of inter-temporal risks such as changes in income levels and sources, climate-related events, and conflicts, particularly important as markets for credit and insurance are incomplete and imperfect.

While there is widespread consensus on the inclusion of vulnerability as a component of development policies, the question remains on how to measure it and how to quantify its impacts on welfare.<sup>3</sup> Recently, Cafiero and Vakis (2006) have suggested an approach based on an ―augmented‖ poverty line, which in addition to including a bundle of consumption goods

> 3 The literature has proposed a number of measures designed to capture the welfare consequences of vulnerability for poor households. See for example the discussion by Ligon and Schechter (2004) and Dercon (2002).

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