to 48.2 percent in 2019.<sup>4</sup> These developments show that insights vary depending on the approach used to understand vulnerability to poverty. When relying on an income-based measure of vulnerability, there is evidence of a translation of the poor into the vulnerable group instead of a steady middle-class. Contrary to that, when relying on a probabilistic approach towards vulnerability, vulnerability has decreased in parallel to poverty. Consequently, considering probabilistic approaches to vulnerability creates valuable insights in addition to evidence generated from purely static views of poverty and vulnerability. The decrease in vulnerability to poverty observed from our probabilistic measure took place both in rural and urban areas.

**Our analysis demonstrates that vulnerability in El Salvador is driven by household-level shocks instead of community-level shocks.** We show that vulnerability is mainly due to idiosyncratic shocks, such as personal illness or job loss, instead of aggregate shocks, such as natural disasters or epidemics. The relative importance of these individual-level shocks is especially marked in urban areas, with a ratio of 3.3 (compared to a relative ratio of 2.2 in rural areas).

**We find that risk factors play a more significant role in vulnerability to poverty than a low accumulation of assets, which is in line with the country context.** We demonstrate that risk-induced vulnerability is relatively more important than poverty-induced vulnerability. This means that individual risk exposure, such as the probability to fall victim to a crime, plays a more significant role than households' low accumulation of assets, such as human capital. Our findings reveal that risks seem to play a critical role in urban areas. The ratio of risk-induced to poverty-induced vulnerability is 1.7 in total, 1.4 in rural areas, and 2.7 in urban areas. These findings are evidence of the different realities of the urban and rural populations in El Salvador. The decreasing vulnerability rate in rural and urban areas comes hand in hand with a decrease in the relative importance of poverty-induced vulnerability for 2016-2019. This development was more marked in urban areas. These results align with available evidence showing that rural areas lack access to critical infrastructure, economic opportunities, and human capital accumulation (Robayo-Abril and Barroso, 2022).

**Our work makes a significant contribution to the economic literature.** To the best of our knowledge, we are the first ones to apply the probabilistic measure of vulnerability to an income-based measure of welfare. Previous approaches relied on consumption-based measures. In addition, we are the first ones to investigate the robustness of this new approach to a number of model specifications and investigate the influence of accounting for potential measurement errors. Our paper adds to a number of papers studying vulnerability to poverty in other countries (Chaudhuri et al. (2002); Kamanou and Morduch (2002); Chaudhuri (2003); Azam and Imai (2010); Dutta et al. (2011); Barrientos (2013); Klasen and Herman (2015); Ward (2016); Skoufias et al. (2021)). Our work also contributes to the current discussion on how to best measure vulnerability to poverty (Pritchett et al. (2000); Celidoni (2013); Gallardo (2017)).

**The paper at hand makes a valuable contribution to the policy agenda in El Salvador, given that the country is characterized by high risk exposure.** Further analyzing and quantifying the country's vulnerability to poverty can bring policy makers valuable insights. Identifying those vulnerable to falling into poverty can assist in determining which policies should be prioritized and developed. The analysis can also inform the design and implementation of adaptive social safety net systems that protect households when shocks arise. Additionally, it can provide evidence on how to best achieve sustainable growth patterns. To the best of our knowledge, we are the first ones to estimate the vulnerability rate in El Salvador via a probabilistic approach.

**To address vulnerabilities in El Salvador, the government should invest in adaptive social safety nets and risk mitigation strategies.** Our analysis reveals that vulnerability in El Salvador is higher than poverty, especially in rural areas. Additionally, households' exposure to individual-level risks plays a critical role in both rural and urban areas. Therefore, it is recommended that policy makers invest in risk mitigation and coping strategies. It is vital to reduce households' exposure to risks, such as crime, illness, or job losses, in the first place and to increase their access to mitigation and coping mechanisms in the second place. One possibility to do so is enhancing the adaptiveness of El Salvador's social safety net and developing a

> 4 Own estimations from El Salvador’s household survey.

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