regions in Latin America and the Caribbean, and 7 of 14 are among the most vulnerable third. The Morazan department scores 33.7 on the index and ranks 47 out of 248, followed by the Cabanas region ranking 59 out of 248, and La Union ranking 62 out of 248.

**Since 2012, there have been slight improvements in El Salvador's capacity to cope with the variety of hazards faced; still, it ranks only 82 out of 192 with respect to its coping capacity on the 2021 INFORM index (DRMKC, 2021).** El Salvador scores 4.6 out of 10 on the 2021 INFORM Index on lack of coping capacity, similar to Peru or South Africa (DRMKC, 2021).<sup>7</sup> This same index was 5.2 in 2012. The lack of coping capacity is to a larger extent driven by institutional factors rather than factors related to inadequate infrastructure. While the institutional risk index is 5.8, the infrastructure risk index is only 3.2. On the other hand, the institutional risk index is mainly driven by a high governance risk index. El Salvador scores 6.3 on the governance risk index. This value is similar to the Arab Republic of Egypt, Mexico, or the Dominican Republic. Consequently, there is still room for institutional improvements to encounter the challenges created by climate change and natural hazards.

**Given the multiple vulnerabilities faced by its population, understanding vulnerability to poverty can bring essential insights to policy makers in El Salvador.** The country context and institutional setting of El Salvador demonstrates that studying vulnerability is highly relevant in this case. To the best of our knowledge, this is the first paper creating a probabilistic vulnerability measure in El Salvador. Consequently, our paper makes a valuable contribution to the country's poverty agenda.

# **3. Vulnerability to Poverty – Definition and Current State of the Literature**

**Understanding vulnerability to poverty helps to understand the future trajectory path of poverty, particularly in developing countries** . Vulnerability is a concept that goes farther than pure income poverty. While pure income poverty is an important driver of social policy, a broader approach to understanding different types of vulnerabilities is needed to inform public policies. This applies especially in environments marked by high risks of shocks like natural disasters, crime, or price volatility, like El Salvador. Public policies should have the capacity to help societies cope with these shocks and prevent them. In particular, safety nets that are designed to protect the poor and vulnerable and increase their resilience against idiosyncratic and systemic shocks will need to be flexible and adaptive. This can contribute towards increasing a country's resilience to poverty. Public policies should have the capacity to be scaled up rapidly and expand their coverage during unanticipated shocks. To do this, policy makers need to have a clear idea of who the vulnerable population is. Looking at vulnerability from a systematic perspective allows for a better understanding of the needs of households and thus better designed policies. Also, the effectiveness of targeting households when designing policies can improve.

**There are two different definitions of vulnerability, one defining vulnerability from a pure income perspective and the other one from a probabilistic viewpoint.** Traditionally, vulnerability to income poverty is based on a monetary income threshold, similar to those used to define poverty from an income perspective. The World Bank often uses the population with a daily per capita income between 5.5 2011PPP-US$ and 13 2011-PPP-US$ to identify the vulnerable population. The concept of probabilistic vulnerability, on the other hand, is based on two subcomponents: The average level of welfare across many periods and the deviation of welfare across these periods (that is, the variance of welfare). Vulnerability is defined as the probability of becoming poor in the future or the "poverty risk." It is, therefore, a forwardlooking extension of the static concept of poverty at a given point in time (Skoufias and Baez, 2021). Instead of considering poverty from a purely ex-post viewpoint, it incorporates a forward-looking perspective on poverty.

**Especially in countries with high fluctuations and income volatility, looking at the current state of poverty falls short of painting a complete picture of the situation.** High fluctuations mean that a poor

> 7 The coping capacity dimension of the INFORM risk index measures which issues the government has addressed to increase the resilience of the society and how successful their implementation is.

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