**We base our vulnerability rate on a threshold equal to a 50 percent probability of falling below the poverty line over the next two years** .<sup>10</sup> This measure is equivalent to a 29 percent chance or higher of falling into poverty in a given year. The vulnerability rate is the share of the population having a higher probability of falling into poverty. If the probability of falling above the probability threshold is driven by a mean household consumption/income below the mean, vulnerability is poverty-induced. If the probability is driven by high consumption/income volatility, vulnerability is risk-induced. The combination of both is the overall vulnerability rate.

**Due to a lack of panel data in the country, we rely on repeated cross-sections.** The El Salvador Multipurpose Household Survey (EHPM) is a cross-sectional survey collected by Dirección General de Estadística y Censos (DIGESTYC) since 1975. There is no longitudinal survey of individuals or households in the country. Therefore, we rely on repeated cross-sections, which provides less information than panel data. Ideally, for the methodology, we would also draw from a community-level survey, which is not available in El Salvador. Instead, we rely on household surveys from 2016 to 2019 and average our variables of interest at the municipality level. We focus on the period 2016 to 2019, as data on self-reported hazards was only collected for the years 2016 onwards. We do not consider the post-COVID period (2020 onwards) due to data limitations. Due to the pandemic, the survey round collected in 2020 is not fully comparable with previous survey rounds.

**In contrast to previous studies applying the vulnerability tool, we employ an income-based and not consumption-based approach, given that poverty is officially measured via income-based measures in El Salvador.** Our primary outcome is overall household per capita income and not per capita consumption, as poverty is measured in El Salvador using income. The tool draws from three sets of parameters: i) A set of covariates, measuring variables of interest at the household or community level, ii) parameters measuring vulnerability and poverty, as well as the threshold for vulnerability and the poverty line, and iii) a set of subgroups of interest (e.g., the rural and urban population as well as the distinctive departments).

**We use a variety of control variables and the international poverty line as parameters in our model.** In this paper, we measure poverty using the international moderate poverty line of 5.5 2011-PPP-US$ and a 29 percent chance or higher of falling into poverty in a given year to characterize vulnerability. We introduce the following control variables at the individual level: gender, marital status, age, homeownership, overall years of schooling, labor activity status, self-employment status, public/private sector employment, informal employment status,<sup>11</sup> and urban/rural status. We also control for the number of household members, the number of children below 15 years old in the household, the number of children aged 3 to 15 years attending school, and the number of household members out of the labor force. Additionally, we control for municipality characteristics: the employment rate, the unemployment rate, the share of selfemployed and entrepreneurs, the share of public sector employees, the share of children attending school, and the share of the population with secondary education. Moreover, we create three indices to measure the individual exposure to crime, insecurity, and natural hazards.<sup>12</sup> Table 1 shows the summary statistics.

> 10 To test the validity of our main messages, we decrease our probability threshold, which defines if a person is vulnerable or not to 25 percent.

> 11 Informality is defined as all workers who do not have health insurance or a signed working contract.

> 12 In order to measure these hazards we take advantage of questions asked on each three of these risks in the national household survey. For each of these three hazards, we calculate a risk index. The risk index is the sum of all subtypes of hazards falling into the respective category. More specifically, we create a dummy variable for each subtype of hazard. This dummy variable is equal to one as soon as a household experiences one form of, for example, crime, and zero otherwise. We then add up the number of, for example, crimes experienced. This then is our respective risk index. In case a household experiences five different forms of crimes, for example, the index has a value of five. In case the household experiences zero crimes, it has a value of zero, and so on. We opt for an index to measure risk exposure to also account for the serverity of hazards. For a detailed overview of the indices see Annex 5.

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