estimated from these regressions. Second, we calculate for each cell the variance of the residuals of the first-stage household-level regression. Third, we regress the residual variance on cohort dummies (created by crossing household head date of birth, education and location dummies) and a polynomial function of age (generally of two degrees or more if statistically significant). From the age profile of the residual variance, we calculate the slope which is an estimate of the variance of asset shocks. Note that this slope should necessary be positive (i.e. the amplitude of shocks grows with age) since the estimated variance should always be positive. This is generally the case. However, when it is not, contiguous cells have been regrouped for the estimates. Finally, once the variance of shocks is estimated for each cohort then the last estimation step consists in drawing values of shocks within the standard normal distribution and estimating the household vulnerability index using coefficient estimates.

Poverty and vulnerability rates are reported in Table 8 where a household is considered as poor when its asset index is below the 80<sup>th</sup> percentile of the 1995 distribution of asset index. An extremely poor household is one whose asset index is below the 40<sup>th</sup> percentile of the 1995 distribution of asset index. A household is considered as vulnerable if the probability to be poor or extremely poor is higher than 0.5, whereas it is considered as highly vulnerable for a probability higher than 0.8. At the national level, poverty headcount (71.5%) is not different from the estimated fraction of the population who is vulnerable to poverty. Moreover, 34.5% of the population is extremely poor, while is 34.7% vulnerable to extreme poverty. Whatever the threshold indeed, poverty and vulnerability do not appear very different from each other. If we look at non-poor people, 10.6% are vulnerable to poverty. Among the population that is vulnerable to poverty, 95.8% are poor, and among the vulnerable to extreme poverty, 85.7% are estimated to be extremely poor.

# **3.2.Poverty and Vulnerability Profiles**

According to previous results, the characteristics of those who are estimated to be poor should not be very different from the characteristics of those who are estimated to be vulnerable to poverty. Table 9 presents the distribution of poor and vulnerable groups across various characteristics. We find clear similarities between the poor and the vulnerable. Indeed, poor and vulnerable groups are mostly rural. Relative to their share in the population (60.2%), rural households are over-represented among individuals who are poor (74.7%) or extremely poor (93.0%) and among those who are vulnerable to poverty (74.2%) or extreme poverty (91.9%). Other categories are over-represented among the poor and vulnerable groups: 41.8% of individuals live in a household where the head has no education, while 53.6% among the poor (77.3% among the extreme poor) and 53.5% among the vulnerable to poverty (74.7% among the vulnerable to extreme poverty). There are more malnourished children under 5 years old among the extremely poor (35.3%) or vulnerable to extreme poverty (34.9%) than in the whole population (23.2%). There are also less 5-11 year old children who attend school among the extremely poor (71.7%) or vulnerable to extreme poverty (72.6%) than in the whole population (83.4%). Interestingly, there are more lactating or pregnant women among the extremely poor (47.3%) or vulnerable to extreme poverty (45.9%) than in the whole population (34.6%).

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