Doctoral thesis of philosophy the vulnerability and resilience of households in vanuatu and solomon islands to global macroeconomic shocks

THE VULNERABILITY AND RESILIENCE OF HOUSEHOLDS IN VANUATU AND SOLOMON ISLANDS TO GLOBAL MACROECONOMIC SHOCKS A thesis submitted in fulfilment of the requirements of the degree of Docto

INTRODUCTION AND OVERVIEW

Introduction

The World Bank's 2000/01 World Development Report emphasized that sustainable poverty reduction necessitates a proactive approach to minimizing vulnerability By focusing on the various risks faced by households and communities, along with their formal and informal coping strategies, the report significantly influenced the understanding of effective social protection It highlighted that preventing future poverty by reducing vulnerability is as crucial as addressing current poverty levels Consequently, the operationalization of vulnerability has become a fundamental aspect of development economics, as reflected in the increasing number of empirical studies that include both "vulnerability" and "poverty" in their titles.

Small Island Developing States (SIDS) in the tropical South Pacific, like Vanuatu and the Solomon Islands, are particularly vulnerable to global economic shocks and natural disasters However, the impact of this vulnerability on individual households remains largely unexplored There is a lack of empirical evidence regarding how households in these countries are affected by economic and other shocks, either by being directly pushed into poverty or through the gradual depletion of their assets as they attempt to cope with these challenges.

There is limited evidence regarding households' resilience to economic shocks, particularly in Vanuatu and the Solomon Islands Few quantitative studies have examined how structural changes, such as rapid urbanization and monetization, affect households' vulnerability to risks Additionally, there is a lack of data on the impact of the local environment and informal insurance systems in offering households a safety net, which is crucial in the absence of a formal welfare system in both countries.

The lack of comprehensive household-level data on vulnerability and resilience significantly limits our understanding of how recent global macroeconomic shocks have impacted households in Vanuatu and the Solomon Islands Investigating these effects is crucial, as similar crises in other developing nations, particularly the surge in international food and fuel prices in 2007 and 2008 followed by the Global Economic Crisis, led to severe human consequences and increased poverty among many households.

There is a significant lack of evidence to inform social protection policies aimed at safeguarding households in Vanuatu and the Solomon Islands from future crises The existing quantitative household-level data may present a misleading view of poverty in these regions (Narsey, 2012, p25) While macroeconomic indicators and qualitative case studies provide valuable insights, they fall short of delivering the detailed information necessary to design and effectively target policies that mitigate household vulnerability to shocks and prevent poverty As highlighted by the United Nations Secretary General, critical knowledge gaps hinder our ability to address essential policy questions (United Nations, 2009).

This thesis aims to fill existing gaps by analyzing household-level data from twelve communities in Vanuatu and the Solomon Islands, collected in early 2011 The research is based on a survey specifically designed to address four key research questions.

I How should poverty be defined and measured in Vanuatu and Solomon Islands?

II Which households are most vulnerable to experiencing economic and other shocks? III What are the dominant coping mechanisms households in Vanuatu and Solomon Islands use to deal with global macroeconomic shocks and how resilient are they to such shocks?

IV Which households in Vanuatu and Solomon Islands are vulnerable to experiencing poverty in the future?

1 This research is part of a wider of a wider multidisciplinary study funded by the Australian Agency for International Development (AusAID) (see Feeny et al 2013 for more information)

This research represents the first comprehensive household-level analysis of vulnerability and resilience across a diverse range of communities in Vanuatu and the Solomon Islands By focusing on households' experiences with recent global macroeconomic shocks, it offers a timely perspective on the impacts of these crises The findings are expected to inform and guide the development of social protection policies in both countries.

This chapter is organized into several sections: Section 1.2 explores the treatment of vulnerability and resilience in the academic literature, with a specific focus on economics Section 1.3 offers background information on Vanuatu and the Solomon Islands, highlighting their distinct development challenges and vulnerabilities Section 1.4 discusses the impact of recent global macroeconomic shocks, while Section 1.5 identifies key gaps in the literature regarding household vulnerability and resilience in these regions Finally, Section 1.6 concludes with a summary of the thesis.

Vulnerability as a lens

Vulnerability, as defined by the Oxford English Dictionary (2000), refers to being "exposed to the possibility of being attacked or harmed, either physically or emotionally," originating from the Latin word "vulnerare," meaning "to wound." However, understanding vulnerability in specific contexts is complex, as Hoddinott and Quisumbing (2003) highlight that it varies in meaning for different individuals Chambers (2006) points out that while vulnerability is frequently mentioned in development discussions, it often lacks clarity and is mistakenly equated with poverty The multitude of operational definitions and methodologies across various disciplines further underscores the challenges in accurately characterizing the concept of vulnerability.

Table 1.1: The multiple lenses of vulnerability

Sector Sample definition Approach to vulnerability

Anthropology “The insecurity of the well-being of individuals, households, or communities in the face of a changing environment” (Moser and Holland, 1997, p5)

The focus is on social vulnerability over economic factors, highlighting the significance of household characteristics instead of solely relying on economic outcomes It emphasizes the critical connections between vulnerability and the access to or ownership of assets, as well as the essential role of social ties and institutional arrangements in addressing these issues.

Vulnerability to poverty is defined as the likelihood of experiencing significant declines in well-being, which may lead an individual to fall below a minimum acceptable level of participation in society at a given time (Guimarães, 2007, p 239).

Conceptualised at the individual/household scale; common usage of multidimensional measures of vulnerability (social, economic, political); possible tension between locally sensitive definition and operational definition

The “characteristics of a person or group in terms of their capacity to anticipate, cope with, resist, and recover from the impact of a natural disaster”

Vulnerability is typically defined in relation to hazards rather than outcomes, serving as an underlying condition Since the 1990s, risk has been understood as a function of both hazard and vulnerability A hazard only transforms into a risk when its impacts interact with a population, highlighting the significant role played by social factors.

“The propensity to suffer a significant welfare shock, bringing the household below a socially defined minimum level” (Kuhl, 2003, p5)

“The likelihood that a shock will result in a decline in household well-being”

The article emphasizes the measurement of poverty through income and consumption, highlighting the dynamics of consumption patterns and the influencing factors It notes that vulnerability can stem from both community-wide covariant shocks and household-specific idiosyncratic shocks Importantly, it points out that poverty does not always correlate with vulnerability.

“Economic vulnerability of a country can be defined as the risk of a (poor) country seeing its development hampered by the natural or external shocks it faces” (Guillaumont, 2009, p195)

A country’s vulnerability depends on existence of certain “inherent” features (e.g economic openness, export concentration, import dependency); exogenous vulnerability arises from structural economic factors

“The degree to which a system is susceptible to, or unable to cope with, adverse effects of climate change, including climate variability and extremes

Vulnerability is a function of the character, magnitude, and rate of climate variation to which a system is exposed, its sensitivity, and its adaptive capacity” (IPCC, 2001, p6)

Perturbations have multiple and compound origins, i.e not solely environmental; interaction between human activity and environmental processes; usually vulnerability from a hazard rather than to an outcome

The interplay between risk and an individual or household's capacity to manage those risks and recover from adverse events is crucial for understanding resilience (Maxwell et al., 2000, p 9).

Nutrition vulnerability is often linked to adverse outcomes such as hunger and malnutrition, with proxy indicators like child malnutrition and consumption patterns being utilized for assessment This vulnerability is influenced by geographical factors, including rainfall patterns and soil fertility, as well as significant political elements and failures in entitlement systems.

Geography “The vulnerability of people to fall into or remain in poverty owing to being at a particular place” (Naude et al 2009, p250)

Vulnerability a function of economic geography and socio‐political determinants in a given geographical region; considers multiple sources of risk; emphasis on interaction of factors

Health “Vulnerable populations are defined as being at risk of poor physical, psychological and/or social health” (Aday, 1993, in Rogers, 1996, p65)

Certain demographic groups particularly vulnerable to poor health outcomes; influenced by a range of background characteristics; recognition of links between poor health and wider social factors

Livelihoods vulnerability refers to the capacity to withstand and recover from various stresses and shocks while preserving the natural resource base (Chambers and Conway, 1992, p 10).

Seasonal shortages and increasing populations contribute to stresses, while shocks such as floods and epidemics pose significant challenges Vulnerability is a comprehensive concept that encompasses the assessment of livelihood capabilities, which are categorized into five capitals: human, natural, financial, social, and physical, along with both tangible and intangible assets.

Source: Author; adapted from Sumner and Mallett (2011) and Guimarães (2007)

Vulnerability has diverse interpretations regarding the nature of a "wound," the individuals affected, and the assessment methods used As a result, a universally accepted definition and evaluation approach for vulnerability has yet to be established, as noted by Sumner and Mallett.

In 2011, the definitional imprecision of vulnerability is viewed as both a weakness and a strength in its analytical application While the diverse interpretations stemming from intellectual fragmentation can be cumbersome, the widespread focus on this central concept across various disciplines underscores its significance.

Vulnerability analyses share several universal aspects, as highlighted by Naude et al (2009) A robust measure of vulnerability should ideally be forward-looking with predictive capabilities, compared to a benchmark minimum level of welfare, and related to specific hazards or risks Additionally, it should be hazard-specific, consider the temporal dynamics of vulnerability during and after a hazard, and be assessed alongside resilience, which reflects the ability to absorb and cope with risks.

Vulnerability assessments, similar to poverty evaluations, are significantly shaped by economic factors, as noted by Narayan and Petesch (2007) They argue that economic paradigms predominantly influence poverty analysis, particularly in defining monetary poverty lines Chambers (2007) highlights that while this approach can lead to a "brutally reductionist" view of well-being, quantitative measures are valuable for comparisons, which are crucial for effective policymaking.

Economic assessments of vulnerability encompass both macro-level evaluations of countries and micro-level analyses focused on households The United Nations has established the Least Developed Country (LDC) classification to highlight the specific development challenges faced by the poorest nations This classification aims to garner additional international support, including special trade provisions from the World Trade Organization (WTO) and concessional loans from the World Bank Additionally, fulfilling Overseas Development Assistance (ODA) commitments to LDCs is a key aspect of Millennium Development Goal (MDG) 8, which emphasizes global partnerships for development.

The United Nations defines Least Developed Countries (LDCs) as low-income nations facing significant structural challenges to sustainable development, characterized by inadequate human resource development and high economic vulnerability LDC status is determined by three criteria: low income, assessed through Gross National Income (GNI) per capita; economic vulnerability, evaluated using the Economic Vulnerability Index (EVI); and human vulnerability, measured by the Human Assets Index (HAI) The EVI highlights that certain countries are structurally hindered in their economic progress due to susceptibility to natural disasters and economic shocks related to trade and exchange.

Vanuatu and Solomon Islands – an overview

This study examines the vulnerability and resilience of households in Vanuatu and the Solomon Islands to global macroeconomic shocks Despite the significant development challenges and acute vulnerabilities faced by Pacific Island Countries (PICs), there has been limited research on these issues in both nations, as highlighted by Feeny et al (2013).

The economic development and social protection in Vanuatu and the Solomon Islands remain "startlingly under-researched" by academics Despite sharing several broad similarities, their distinct recent economic performances highlight contrasting historical contexts that are crucial for analyzing recent global macroeconomic shocks This section aims to provide essential background information on each country, setting the stage for the subsequent analysis in the thesis.

Vanuatu and the Solomon Islands, located in the South Pacific Ocean northeast of Australia, share several similarities as archipelagic nations with small populations dispersed across numerous islands Vanuatu has approximately 250,000 residents across 85 islands, while the Solomon Islands has around 550,000 inhabitants spread over nearly one thousand islands Both countries predominantly feature Melanesian cultures and have a shared British colonial history They operate under a unicameral national government based on the Westminster system, alongside provincial governments and municipal councils Notably, Vanuatu's Constitution formally recognizes the Malvatumauri National Council of Chiefs (MNCC), highlighting the significance of traditional governance within its national framework.

When measured in terms of GNI per capita both Vanuatu and Solomon Islands are considered lower-middle income countries 6 Yet both are also LDCs and SIDS – the latter also

5 Vanuatu was a colony of both the British and the French, under what became known as The Condominium; both cultural influences are still strong today

The World Bank classifies countries based on their Gross National Income (GNI) per capita As of 2012, countries are categorized as follows: "low-income countries" with a GNI of $1,035 or less, "lower-middle income countries" with a GNI between $1,036 and $4,085, "upper-middle income countries" with a GNI ranging from $4,086 to $12,615, and "high-income countries" with a GNI exceeding $12,615.

Low and middle-income countries (LMICs), such as Vanuatu and the Solomon Islands, are often classified as "developing countries," highlighting their unique vulnerabilities, including limited size, remoteness, and susceptibility to natural and economic shocks These nations are significant recipients of official development assistance (ODA) on a per capita basis, with Australia being a major source of foreign aid in the region.

Figure 1.1: Map of the South West Pacific Ocean

Source: University of Texas Libraries; The University of Texas at Austin

Vanuatu and the Solomon Islands share similar economic structures characterized by dual economies Both nations feature large rural populations engaged in subsistence agriculture and small-scale income-generating activities, alongside a market economy primarily concentrated in urban areas Additionally, both countries are experiencing significant urban population growth, both in absolute numbers and as a percentage of their total populations, driven by various contributing factors.

Accordingly, Vanuatu and Solomon Islands are referred to throughout as “developing countries” despite not being in the lowest-income bracket

Vanuatu's status as a Least Developed Country (LDC) is primarily attributed to its vulnerabilities, despite having met two of the three graduation thresholds—human assets and GNI per capita—since 1994 The lack of a graduation recommendation stems from concerns about the sustainability of its social and economic improvements, largely due to the country's susceptibility to external shocks, including natural disasters and economic fluctuations.

In the 2010-11 financial year, the Solomon Islands ranked as the third largest recipient of Australian Official Development Assistance (ODA), while Vanuatu was the eleventh (DFAT, 2012) Both countries face a lack of emigration opportunities for Melanesian labor, particularly within the region The private sector in each nation is primarily driven by services and agriculture, with tourism being a significant contributor to Vanuatu's economy, and the Solomon Islands relying on natural resource exploitation, especially logging and mining However, the private sector remains underdeveloped due to administrative delays and government charges, as indicated by the World Bank's Ease of Doing Business Index Consequently, the public sector is the largest employer in both countries, while informal markets accommodate much of the surplus labor from school leavers and migrants moving to urban areas Key geographic, economic, and development indicators for each country are summarized in Table 1.2.

Remittance to GDP ratios in Vanuatu and the Solomon Islands are among the lowest in the Pacific SIDS (UNCTAD, 2012) Both countries have implemented temporary labor migration schemes in New Zealand and Australia to attract Melanesian workers for seasonal horticultural tasks like fruit picking Although these schemes are well-received in Vanuatu and the Solomon Islands, the New Zealand program is still small in scale (ILO, 2014), and the Australian initiative is just beginning to develop.

Table 1.2: Vanuatu and Solomon Islands

GNI per capita (2012; current $US) $3,080 $1,130

(2012; per cent of value added)

Average trade in goods balance

Average trade in services balance

Tourism as a share of total export receipts

(2008-2011; per cent of total export earnings)

Palm oil & kernels – 11.5% Copra & coconut oil – 7.2% Export concentration index (2010)

(2009; per cent of government revenue) 36.5 23.9

HDI ranking (2013; out of 186 countries) 124 143

(2010; per cent of school aged children) 54.7 48.4

Adult literacy rate (2010; per cent) 83.2 84.1

The data for this analysis is derived from several reputable sources, including the CIA World Factbook (2012), World Bank Development Indicators (2013), and the UNDP Human Development Report (2013) Additionally, insights are drawn from the RBV Quarterly Economic Review (September 2013), which provides a detailed table on the value of exports, as well as the CBSI Quarterly Economic Review (September 2013) that categorizes export values The UNCTAD Export Concentration Index (2013) and the OECD International Development Statistics online database further enrich the findings.

2013, Net ODA Disbursements from all donors combined by Least Developed Country (LDC); ADB Key Indicators for Asia and the Pacific,

Vanuatu has emerged as a standout performer in the Pacific, showcasing one of the region's fastest-growing economies, primarily fueled by robust tourism growth and significant microeconomic reforms in telecommunications and aviation In contrast, the Solomon Islands have not experienced the same level of economic success recently.

The Solomon Islands has faced significant challenges due to ethnic tensions in the early 2000s, resulting in a substantial exit of foreign investors and a prolonged decline in the economy's productive capacity.

By 2011, the Solomon Islands had only regained its nominal per capita income level from 1999, highlighting significant economic discrepancies This is reflected in various development indicators, where the Solomon Islands ranks lower in both the Human Development Index (HDI) and the Human Asset Index (HAI) Currently, the Solomon Islands is categorized as having "low human development," in contrast to Vanuatu, which is classified as having "medium human development" (UNDP, 2013).

Figure 1.2: GNI per capita Vanuatu and Solomon Islands

Source: World Bank Development Indicators (2013)

1.3.1 The unique vulnerabilities of Vanuatu and Solomon Islands

Vanuatu and the Solomon Islands are recognized for their significant vulnerability on a global scale, consistently ranking among the world's most at-risk nations The 2009 triennial review by the UN Committee for Development Policy identified both countries as part of the 14 most vulnerable nations, as indicated by the Economic Vulnerability Index (EVI), which highlights their susceptibility to external shocks.

The Tensions, as described by UNICEF (2005, p3), stemmed from a power struggle fueled by uneven development Disparities in wage employment, services, and living standards led to significant urban migration, with individuals leaving subsistence livelihoods in remote islands for Honiara and northern Guadalcanal This migration fostered resentment among the local population, ultimately resulting in violent conflict.

The effects of recent global macroeconomic shocks

In recent years, the global economy has faced significant shocks, notably the sharp rise in international food prices between 2007 and 2008, driven by strong demand and supply constraints This period saw rice prices surge by 150% in just four months, leading to a pronounced "food crisis." The situation was exacerbated by soaring crude oil prices, which raised food production costs and increased the appeal of biofuels, further limiting agricultural land According to World Bank data, food prices soared by 70% in the year leading up to mid-2008, while crude oil prices nearly doubled, reaching a record $147 per barrel in July 2008.

2011) This represented the sharpest 12–month rise recorded in food and fuel prices since the inflationary spikes associated with the oil price shocks of the early 1970s

The global financial crisis, initiated by the collapse of Lehman Brothers in September 2008, led to a significant credit crunch and a rapid decline in commodity prices Major developed economies faced deep recessions marked by sharp decreases in output, Foreign Direct Investment (FDI), and global trade This crisis had widespread repercussions, affecting developing countries and becoming known as the Global Economic Crisis (GEC) Consequently, in 2009, global output experienced its first decline since World War II.

Figure 1.3: International food and fuel prices and global output

Price data index: (20040); GDP data annual percentage change, nominal

* Arithmetic average between the FAO and World Bank monthly food price indices

** Crude oil, average spot price of Brent, Dubai and West Texas Intermediate monthly prices, equally weighed

Sources: FAO; World Bank; WTO

The unexpected and rapid onset of these events significantly disrupted the world economy, marking a stark contrast to the previously held belief in a "Great Moderation" era characterized by stable global inflation and output.

Developing countries, especially net commodity importers like Vanuatu and the Solomon Islands, faced significant challenges due to extreme volatility in commodity markets These nations saw a decline in their terms of trade, as rising import prices outweighed any increases in export prices Consequently, this situation worsened current account imbalances, strained foreign exchange reserves, and led to imported inflation.

The impact of the global economic crisis (GEC) on developing countries varied significantly based on their unique characteristics Nayyar (2011) identified key transmission channels, such as exports, remittances, and capital flows, through which the recession affected these nations He noted that smaller countries with limited production and export diversification were particularly susceptible to declines in global trade due to their inability to mitigate risks Conversely, countries with robust economies prior to the crisis experienced less severe effects, largely because they had the fiscal and monetary resources to absorb revenue losses and implement targeted stimulus measures to counteract the shocks (Agbetsiafa, 2011; FAO, 2011).

The multiple crises have severely impacted households in developing countries, leading to a significant decline in real disposable incomes and household resilience due to rising imported inflation The Food and Agricultural Organisation (FAO) reported that food price increases from 2006 to 2008 pushed an additional one million people in Small Island Developing States (SIDS) into undernourishment In the Asia-Pacific region, nearly 25 million workers lost their jobs as trade-exposed industries contracted, while the Asian Development Bank (ADB) estimated that the recession hindered 64 million people in Asia from escaping poverty and pushed 50,000 into poverty in the Pacific These crises are expected to slow progress towards the UN’s Millennium Development Goals (MDGs) and lead to a substantial upward revision of extreme poverty forecasts for 2020 Green et al (2010) emphasized that, despite the distinct impacts of the food and fuel crises and the global economic crisis, they collectively represent a single trauma for many individuals, manifesting as the ongoing struggle to provide food for their families.

The effects of international shocks were notably felt in Vanuatu and the Solomon Islands, where inflation surged as reflected in the Consumer Price Index (CPI) during 2007 and 2008 This inflation was primarily driven by imported food prices, with the Solomon Islands experiencing a year-ended inflation rate of 24 percent in mid-2008, while food CPI growth reached 35.8 percent Vanuatu also saw CPI growth peak at around 6 percent, significantly above its pre-crisis average of 2 percent, with food CPI growth hitting 11.4 percent Despite a decline in international prices during the Global Economic Crisis (GEC), domestic prices in both countries continued to rise, albeit at a slower pace.

Figure 1.4: Inflation in Vanuatu and Solomon Islands

Quarterly data; Year-ended percentage change; bars indicate contribution to growth

Sources: Reserve Bank of Vanuatu; Solomon Islands National Statistics Office

In 2009, falling commodity prices offered a brief relief for the balance of payments in Vanuatu and Solomon Islands, but both nations were significantly impacted by the Global Economic Crisis (GEC), leading to a notable decline in GDP per capita growth Solomon Islands faced a more severe downturn due to its higher exposure to falling commodity prices, particularly logs, and its pre-existing fiscal constraints This resulted in a sharp decrease in GDP per capita Conversely, Vanuatu experienced a slowdown in growth, but the decline in private consumption, driven by capital inflows from Australia and New Zealand, was partially mitigated by a temporary boost in tourism and ongoing construction activities linked to the MCC road-building project.

The decline in commodity prices, coupled with weakening domestic output and a deteriorating external trade position, significantly impacted government revenue in Vanuatu Following substantial increases in trade revenue in previous years, Vanuatu experienced a collapse in 2009 and 2010, leading to a marked deterioration in its fiscal position (IMF, 2011b, p7) In response, the government implemented measures such as freezing the public sector wage bill and cutting capital expenditures.

The Solomon Islands faced significant challenges as government revenues declined due to falling log export duties, leading to a 35 percent cut in expenditure to stabilize its cash position This reduction in spending adversely affected the delivery of essential services In response to the financial crisis, the government sought a precautionary Standby Credit Facility from the IMF, essentially requesting a bailout.

Figure 1.5: GDP per capita in Vanuatu and Solomon Islands

Annual percentage change: real GDP; PPP weights*

Source: World Bank Development Indicators (2013).

The vulnerability and resilience of households in Vanuatu and Solomon Islands

Understanding the vulnerabilities and resilience of households in Vanuatu and the Solomon Islands is crucial due to their acute susceptibility to national economic shocks The significant human impacts of recent global macroeconomic events highlight the necessity for in-depth analysis in regions known for their exposure to such shocks.

Despite its significance, the vulnerability of households in this area has been largely overlooked in empirical research To date, only one study, conducted by Jha and Dang in 2010, has systematically investigated this issue.

A study on poverty in Melanesia, particularly in Papua New Guinea (PNG), revealed that many households are vulnerable to poverty due to various risks, with vulnerability levels differing by region, household size, gender, and education However, the research, based on aggregate household income and expenditure data, is somewhat outdated, dating back to 1996.

A comprehensive and current assessment of household vulnerability to poverty in Vanuatu and the Solomon Islands is essential Significant knowledge gaps persist regarding households' current well-being, the shocks they encounter, and their responses to these shocks Consequently, there is insufficient evidence for the governments of Vanuatu and the Solomon Islands, as well as international donors, to effectively develop and target social protection policies aimed at reducing households' exposure to future shocks and enhancing their overall well-being.

Understanding the unique characteristics of Vanuatu and the Solomon Islands is essential for analyzing household well-being in these countries Both nations present distinct development scenarios, facing significant vulnerabilities while lacking many traits typically linked to severe monetary poverty found in the world's most at-risk developing nations This situation is largely due to the reliance on domestic food cultivation for livelihoods and the presence of robust informal safety nets supported by strong social and familial connections.

This thesis emphasizes the significance of local context in its analysis, focusing on local customs and practices that influence household behavior It incorporates important local aspects into the measures of household well-being and vulnerability, redefining poverty in multidimensional terms to reflect the unique economic structures of the countries studied Additionally, the multidimensional poverty framework is specifically tailored to the Melanesian context, marking a novel approach in both countries.

This thesis rigorously analyzes key local characteristics to assess household-level vulnerability and resilience, making it highly relevant for local policymaking and academically significant By integrating these factors, it establishes a solid foundation for proposing evidence-based policy recommendations that enhance the inherent strengths of the local context, ultimately improving the lives of Ni-Vanuatu and Solomon Islanders.

An outline of this thesis

This thesis analyzes empirical data from Vanuatu and the Solomon Islands to assess household vulnerability and resilience to global macroeconomic shocks It investigates the current well-being of households, the types of shocks they encounter, and their responses to these shocks By integrating this information, the study estimates the overall vulnerability of households in these regions.

The thesis consists of seven chapters, with Chapter 1 highlighting the significance of assessing household vulnerability and resilience in Vanuatu and the Solomon Islands It offers macro-level background information on both countries and discusses the impacts of recent global economic shocks.

The next chapter, Chapter 2, details the methodological design of the research It provides specific details on the unique household survey as well as the twelve survey locations

Chapters 3 through 6 include the empirical contributions of the thesis Each attempts to answer a single research question and is structured similarly, with its own literature review, empirical analysis and conclusion The final chapter provides policy recommendations drawn from the evidence gathered in this thesis The recommendations focus on ways to reduce households’ vulnerability to economic shocks as well as to strengthen households’ resilience

Chapter 3 measures households’ poverty using a non-monetary measure of multidimensional poverty that more closely reflects the HDI It replicates the Multidimensional Poverty Index (MPI) – a widely-used non-monetary measure of household poverty devised by Alkire and Foster (2011) that directly focuses on three dimensions of well-being: health, education and material standard of living, split across ten indicators of deprivation This marks the first time that the MPI is reported for Solomon Islands (it has already been reported for Vanuatu at a national level) and the first time that the measure has been reported at the sub-national level in either country This chapter makes a further contribution to the identification of poverty by constructing a Melanesian MPI (MMPI) which tailors the MPI to suit the local Melanesian context

Chapter 4 contributes to the understanding of the transmission of global macroeconomic shocks to households in Vanuatu and Solomon Islands By examining households’ experiences of global macroeconomic shocks, as well as other covariate environmental and idiosyncratic shocks, important information is gleaned on the extent to which households are integrated into the global economy as well as the key role played by traditional economic systems in providing resilience A bivariate probit model also formally examines whether a set of explanatory variables helps to predict whether a household will experience a given shock, controlling for the impact of other potential correlates This follows a similar approach to modelling exposure to shocks in Tesliuc and Lindert (2004)

Chapter 5 focuses on the resilience of households to the effects of recent global macroeconomic shocks It makes three important contributions Firstly it catalogues the dominant coping responses of those households that experienced a recent global macroeconomic shock Secondly, it examines households’ vulnerability to the adverse effects of these shocks, using a similar econometric technique to that used by Corbacho et al (2007) Thirdly, it tests the effectiveness of each individual coping response in helping households withstand the effects of the shocks, holding constant the effects of households’ locational and demographic characteristics

Chapter 6 brings together information from each of the previous chapters on household well- being, shock experience and responses to shocks to estimate household vulnerability to future poverty This represents the first time that the incidence, location and severity of vulnerability is identified in Vanuatu and Solomon Islands It also makes a contribution to the vulnerability literature more broadly by examining vulnerability using broader, non-monetary, measures of well-being, such as the MPI, as well as a measure of poverty specifically tailored to suit the local context (the MMPI) While there are a number of approaches to estimating household vulnerability this chapter uses an approach pioneered by Chaudhuri et al (2002) that has been used in a wide variety of developing country contexts and makes use of cross-sectional data with some simplifying assumptions

Chapter 7 concludes the thesis by reviewing the findings in accordance with the research questions outlined here in Chapter 1 Six evidence-based recommendations are then proposed for policymakers Finally, the limitations of the study are discussed and avenues for future research are suggested.

DATA AND METHODOLOGY

Introduction

This research is based on a unique cross-sectional household survey conducted in the first half of 2011, targeting six diverse communities across Vanuatu and the Solomon Islands The survey aimed to address specific research questions and included a total of 955 households, with 468 from Vanuatu and 487 from the Solomon Islands These communities represent varying levels of integration into formal market systems and engage in different livelihood activities.

The six selected communities in each country offer a diverse perspective on vulnerability and resilience in both urban and rural settings, with research permissions influencing their choice While these communities are comparable across nations, their heterogeneous nature may restrict the generalization of findings to the broader populations Nonetheless, they provide a rich evidence base for a comprehensive analysis of the factors affecting household vulnerability and resilience within the Melanesian context.

This thesis is part of a multidisciplinary study on vulnerability and resilience, conducted in collaboration with various academic institutions and Oxfam Australia, and funded by AusAID through the Australian Development Research Award Scheme The broader research project, detailed in Feeny et al (2013) and Feeny (2014), utilized mixed methods, including qualitative data from focus groups and key informant interviews While the thesis primarily focuses on quantitative survey data, it occasionally incorporates qualitative insights to contextualize the quantitative findings.

This chapter outlines the data and methodology employed in the thesis Section 2.2 details the household survey data utilized in the research, while Section 2.3 describes the fieldwork approach and sampling methodology.

18 Ethics approval was provided by the Business College Human Ethics Advisory Committee of RMIT University, Ref: 1000140

Section 2.4 concludes with descriptions of the characteristics of each of the twelve communities surveyed

Data

The limited availability of data significantly hinders the assessment of well-being in the Pacific Islands, as many Pacific Island Countries (PICs) struggle with scarce resources for collecting national data from small, dispersed populations Consequently, their capacity to collect, collate, and analyze survey data is restricted, with data collection often deprioritized due to high costs and technical demands As a result, the information available is frequently outdated, incomplete, or entirely lacking, a challenge acknowledged by both donors and PIC governments.

Despite the challenges in data collection in Pacific Island Countries (PICs), Vanuatu and the Solomon Islands possess significant aggregated data sets focused on household well-being Both nations conduct periodic Household Income and Expenditure Surveys (HIES) that offer insights into material living standards and serve as the foundation for estimating household poverty Additionally, various standalone studies, such as the Multiple Indicator Cluster Survey (MICS) in Vanuatu, have further illuminated aspects of household well-being.

2007) and the Alternative Indicators of Well-being Survey (MNCC, 2012), while in Solomon Islands it includes the Demographic and Health Survey (SIDHS, 2007) In 2009 both countries also completed a Census

While the individual data sets provide valuable insights, they fall short for a comprehensive analysis of household vulnerability and resilience Each study is episodic, employs varied sampling methods, and assesses well-being from specific perspectives, often influenced by the sponsoring agency's motivations Additionally, the inability to link data to individual households limits comparability across studies, restricting analysis primarily to a national level.

Aggregated data sets are often inadequate for analyzing the impact of specific shocks on household well-being due to two main reasons Firstly, nationwide data typically lacks detailed information on individual households' experiences and responses to shocks, as these data sets are not designed for such analysis Secondly, effective vulnerability assessments require comprehensive household-level information, including access to various assets, living standards, and demographics, which nationwide studies cannot provide In regions like Vanuatu and the Solomon Islands, this information also encompasses cultural practices and non-monetized production As noted by Morris (2011), this depth of data is essential for policymakers to understand the underlying causes of poverty and vulnerability among households.

This research addresses the limitations of existing data sets by utilizing quantitative data from a tailored cross-sectional household survey The survey is informed by the methodologies of several notable household surveys conducted in the Pacific region (Banks 2000; Chung and Hill).

Each study conducted by the National Statistics Office in various countries has typically received funding from multilateral donor agencies For example, the MICS in 2007 was funded by UNICEF, the MNCC in 2012 was supported by The Christensen Fund, and the SIDHS in 2007 was financed by the ADB.

The World Bank’s Living Standards Measurement Study (LSMS) stands out as it enhances integrated household surveys by incorporating specific modules that gather data on shocks and coping strategies So far, this approach has been implemented in studies conducted in Guatemala, Tanzania, and Malawi (World Bank, 2013c).

2002; SIDHS, 2007, Sijapati-Basnett, 2008) however, it is specifically tailored to answer the research questions

The survey collects data on household demographics, physical characteristics, migratory behavior, productive assets, income and expenditure, social assets, and respondents' perceptions of their well-being It also includes vital local factors such as land tenure, food garden usage, contributions to customary ceremonies, church tithes, and the level of support exchanged within the broader social network.

The survey gathers crucial data on key areas identified by Hardeweg and Waibel (2009) to assess household vulnerability It captures households' experiences with economic shocks, including increases in food and fuel prices, labor market changes, and other factors impacting well-being, such as crop failures, crime, and health issues Additionally, the survey examines households' responses to these shocks, highlighting traditional insurance methods, shifts in spending habits, utilization of natural resources, and labor market adaptations.

The survey focuses on households, defined as the individuals living within a dwelling, which ensures a clear and consistent unit of analysis across various communities and countries This approach minimizes the need for interpretation by enumerators and respondents, promoting uniformity It operates on the premise that if one individual in a household has access to a resource or skill, all members benefit, reflecting the concept of intra-household externalities Consequently, the survey only requires a representative adult to answer questions about "the people living in this house," differing from many studies that concentrate on the household head's characteristics This methodology was informed by insights gained during the pilot phase conducted in-country.

Water and sanitation data are based on the MDG guidelines, which distinguish between improved and unimproved services To assess households' access to these services, survey participants selected from a visual representation of various quality water and sanitation options, as detailed in the WHO/UNICEF (2010) report.

22 This differs to other studies in the region: MICS (2007) defined a household as “a group of people that are eating from the same pot”

Intra-household externalities are often examined in relation to literacy, but Lordan et al (2012) apply a similar methodology to explore the connection between socioeconomic status and health in Fiji Their research focuses on the household as the primary unit of analysis, emphasizing the importance of kinship and family ties Notably, the designated "head" of the household is frequently identified as the oldest male, regardless of his actual residence, suggesting that this title may not reflect the household's practical dynamics.

Defining a household solely by its residents oversimplifies the complexities inherent in Pacific Island Countries (PICs), where strong familial ties create a fluid and indeterminate concept of household In these contexts, clusters of dwellings may operate as a single economic unit, while individual homes can host multiple economic decision-makers This approach also overlooks significant intra-household dynamics, as it often reflects the perspective of only one member, a critique highlighted in feminist analyses of household surveys Additionally, resources within households are seldom pooled equitably among members Understanding these intra-household relations is essential for grasping the vulnerability and resilience of households.

The survey aims to explore informal exchanges within the familial economic framework and intra-household dynamics, emphasizing gift-giving and cultural exchanges It includes questions to determine whether men or women are the primary decision-makers regarding household spending and resource allocation Additionally, a balanced gender split among survey respondents was ensured.

The survey utilized in both Vanuatu and the Solomon Islands was carefully translated into the local languages, Bislama and Solomon Pidgin, respectively Recognizing that many Melanesians live in rural areas with limited formal education, the survey was crafted to ensure cultural relevance and linguistic accessibility This approach resulted in a conversational survey format, with intuitively flowing questions that respondents could easily understand.

Field work and sampling methodology

Field research was conducted in the Solomon Islands in February 2011 and in Vanuatu in June 2011, utilizing a stratified multistage cluster sampling method This approach involved purposively selecting sample locations based on diverse criteria, along with a systematic method for choosing households within each selected area.

In late 2010, key research stakeholders established a comprehensive set of criteria for selecting sampling units during initial scoping visits to each country It was determined that six communities would be selected in each country to ensure a rich data set reflecting the various vulnerabilities and resilience of households to global macroeconomic shocks The distribution of these communities aimed to align closely with Census data regarding urban and rural households, leading to the decision to target two urban and four rural communities in each country.

In twelve communities, focus groups were conducted with older women, older men, young women, and young men to analyze the distinct effects of economic shocks on each demographic Additionally, key informant interviews were carried out with leaders at the community, provincial, and national levels.

Key stakeholders involved in the project included staff from the Oxfam Australia office in each country, as well as representatives from government ministries and major donor agencies It is essential that each country is broadly comparable to enable effective cross-country comparisons.

The selection of communities for the research was guided by a comprehensive set of criteria In rural areas, the focus included sampling at least one geographically remote location per country, regions known for cash crop production, and areas linked to Oxfam Australia’s development initiatives In urban settings, the research targeted communities in capital cities and the second largest cities, with a particular emphasis on households in squatter settlements, which are characterized by low well-being and are often neglected in national surveys due to their informal living conditions To ensure a diverse representation of experiences, each of the four urban communities was divided between two squatter settlements.

In selecting communities for research, gaining permission for entry was paramount, as strong relationships are crucial in Melanesian culture Without the approval of local leaders, research efforts would likely face significant obstacles Therefore, after identifying a suitable region, Oxfam leveraged its network of local partners to pinpoint specific communities with established positive relationships Table 2.1 summarizes the characteristics of the twelve surveyed communities.

29 The six locations were first selected in Solomon Islands Six locations that corresponded to these locations, and that satisfied the existing criteria, were then subsequently selected in Vanuatu

Twelve individuals, designated as "point people" by the local Oxfam office, were selected to assist in gaining access to each community visited Their responsibilities included obtaining permission from community leaders for research activities, informing the wider community about the project's objectives, and serving as cultural liaisons throughout the research process.

Table 2.1: Communities surveyed and their characteristics

Region Vanuatu Solomon Islands Characteristics

Squatter settlements in the capital city

Luganville (Santo Is.) split between:

Auki (Malaita Is.) split between:

Squatter settlements in the second largest city

Guadalcanal Plains Palm Oil Limited (GPPOL) Villages (Guadalcanal Is.)

Rural communities heavily involved in commercial agriculture

Hog Harbour (Santo Is.) Malu’u (Malaita Is.)

Rural communities separated from the respective second city by a direct road

Mangalilu (Efate Is.) Weather Coast (Guadalcanal Is.)

Communities on the same island as the respective capital city with known links to Oxfam Australia

Banks Islands (Mota Lava Is.) Vella Lavella Is

Remote communities are located far from their capital cities, as detailed in Appendix A, which lists the surveyed villages The distinctions between urban and rural areas reflect the regional differences identified in the national censuses and serve as a useful approximation of the dualistic economic structures discussed in Section 1.3.

Conducting field work in Vanuatu and the Solomon Islands incurs significant travel and time expenses, leading to a research budget that allowed for approximately one thousand household surveys This total was intended to be evenly allocated across twelve communities, aiming for about 85 surveys in each location.

The fieldwork methodology across countries involved recruiting local researchers through agencies and job boards, ensuring a strict gender balance Researchers were divided into two teams, each assigned to survey three geographically grouped communities—one team in Guadalcanal and the other in Malaita and Western Province in the Solomon Islands, while in Vanuatu, one team focused on the north and east, and the other on the south and west Each of the four teams operated concurrently for three weeks, dedicating one week to each community and traveling on weekends The research model began with a community welcome to introduce the team, followed by the collection of survey data.

The travel expenses for fieldwork in Vanuatu and the Solomon Islands were significant, encompassing international flights from Australia for the research team, which included the author and other principal researchers Additionally, local research teams, comprising principal researchers, survey enumerators, focus group facilitators, and team leaders, incurred substantial domestic travel costs to reach twelve surveyed communities This travel involved internal flights, extensive boat trips on speedboats, ferries, outboard motorboats, and dugout canoes, as well as various land transport options like buses and flatbed trucks, often requiring multiple modes of transport to access a single location.

As far as possible, households in each community were sampled according to an objective rule-based approach The UN Department of Economic and Social Affairs defines this as

Systematic sampling involves selecting from a list using a random start and a predetermined selection interval, as outlined by the United Nations (2005) Enumerators were instructed to randomly choose an initial house and then survey every second house, adjusting to adjacent houses if no one was home This method aims to maintain objectivity and ensure valid survey results for inferences Only adults over 18 were surveyed, with male team members interviewing men and female team members interviewing women To capture diverse experiences, team leaders were required to maintain a gender balance, limiting any gender skew to 40 to 60 percent A breakdown of the number of surveys conducted in each community is provided in Table 2.2.

Table 2.2: Sampling distribution by community

Community Surveys Per cent of total sample

As part of a comprehensive mixed-methods research project, four focus groups were conducted in each community, targeting older men, young men, older women, and young women Additionally, key informant interviews were carried out with community leaders At the end of the week, a community debrief was organized to present initial findings and insights from the research team to community members.

At the conclusion of fieldwork in each country household survey data were then entered manually into a computer database by the same individuals who were survey enumerators.

Details of the communities surveyed

This section outlines the characteristics of the surveyed communities in Vanuatu and the Solomon Islands, supported by a statistical overview in Appendix B.

In Port Vila, Vanuatu's capital, the settlements of Ohlen and Blacksands are primarily inhabited by migrants from the outer islands Ohlen, a densely populated area on an escarpment that functions as the city's water catchment, faces significant vulnerabilities due to limited land and resources, as highlighted by UNICEF (2011b, p31-35) Many families in Ohlen struggle with unemployment or low incomes, resulting in a low rate of full-time primary school attendance among children Access to utilities is restricted in some areas, and many residents pay rent for their homes While established residents maintain nearby gardens, newcomers are compelled to cultivate their gardens outside the city due to land constraints.

Blacksands, the largest informal settlement in Port Vila, primarily houses migrants from Tanna, Pentecost, and Paama, and is noted for its unique heterogeneity due to its long-standing history The land ownership is held by residents of the nearby Ifira island and local politicians, with residents either paying regular rent or providing votes to the landowners While some residents have successfully purchased land and gained access to essential utilities like electricity, water, and sanitation, the majority of squatters remain without these basic services.

In Luganville, Vanuatu's second largest town on Espirito Santo, two rapidly growing settlements, Sarakata and Pepsi, were surveyed These communities, home to migrants from nearby islands like Malekula, Ambrym, and Pentecost, are separated by the Sarakata River Sarakata's development was driven by political patronage and is supported by the Luganville Municipal Council, resulting in better access to utilities such as electricity, drainage, and sealed roads In contrast, Pepsi, primarily composed of informal settlers, faces significant limitations in utility access.

Mangalilu and the nearby island of Lelepa, located in the northwest of Efate, are rural communities that currently lack electricity, piped water, and a secondary school However, the recent completion of the island's ring road, a significant US-backed project by the Millennium Challenge Corporation (MCC), has improved transport links to Port Vila, enhancing income-earning opportunities for residents This infrastructure development facilitates commuting for employment and opens new tourism markets Additionally, the residents of Mangalilu and Lelepa, in collaboration with nearby communities, own the UNESCO World Heritage site of Chief Roi Mata’s Domain, which has become a modest yet regular source of income through tours.

Hog Harbour, located 50 kilometers north of Luganville, is connected by the sealed East Santo Road, the only other sealed road in Vanuatu outside of Efate This rural community has ample land for gardening and agricultural cash crops, with most households engaged in copra production, the region's primary export The sealed road facilitates access to central markets in Luganville, home to Vanuatu's largest copra mill, and supports inbound tourism from Luganville airport Additionally, Hog Harbour's proximity to the famous Champagne Beach attracts tourists and large cruise ships, allowing residents to sell handicrafts and trinkets for extra income The community is equipped with a primary school and health clinic, while a secondary school is accessible via a short bus ride.

The Baravet community on Pentecost's southwest coast is primarily focused on cash-crop farming, especially kava and copra, which are shipped to major markets in Port Vila and Luganville According to Lebot et al (1997), approximately two-thirds of kava shipped domestically comes from Pentecost, with farmers increasingly shifting from traditional garden cultivation to more industrialized growing methods The 2007 Agricultural Census revealed that 37% of Vanuatu's kava plants are located in Pentecost, despite the island's small rural population share of 10% A road connects Baravet to the main airstrip in Lonorore, but a wide river without a bridge isolates the community from tourism opportunities linked to the nagol land-diving ceremonies Consequently, goods are primarily transported by ship, and local growers often feel inadequately compensated for their crops due to reliance on external shipping and market agents for price negotiations.

Mota Lava, a small island in the Banks Islands of Vanuatu, is home to communities that primarily depend on subsistence farming, fishing, and a limited production of copra for their livelihoods Notably, some households have participated in New Zealand's Recognised Seasonal Employer Program, facilitated by a newly established local employment agency Trade in the region is largely conducted via ships, which deliver essential goods and transport copra to Luganville, although long intervals between shipments force families into a semi-subsistence lifestyle Local fish from the nearby Reef Islands are typically sold for consumption, while high-value exports like lobsters and coconut crabs occasionally provide additional income The island features a grass airstrip with infrequent flights and limited tourism, and although a road connects the airstrip to the community, it is in disrepair At the time of the survey, only two vehicles were present on the island.

White River and Burns Creek, two settlements in Honiara, the capital of the Solomon Islands, showcase a diverse community White River, a densely populated area in the west, features a mix of permanent homes with electricity and informal housing without it, although gardening land is limited The settlement is known for its ethnic diversity, including residents from various regions of the Solomon Islands and as far as Kiribati Located at the junction of Prince Philip Road and feeder roads leading to the suburbs and the west coast of Guadalcanal, White River was historically home to a large betel nut market, which was dismantled by local authorities In its place, a smaller informal market has emerged, where women sell a variety of goods such as betel nut, cigarettes, vegetables, fruit, and barbequed meat to locals and passers-by.

Burns Creek is a predominantly mono-ethnic settlement located approximately five kilometers from Honiara's center along the Kukum Highway, which connects to the airport and Guadalcanal Plains This relatively new community primarily houses Malaitans displaced during the ethnic conflict known as “The Tensions.” With a more rural character and lower population density than nearby White River, Burns Creek offers ample space for gardens However, the settlement lacks access to mains electricity and faces challenges such as high unemployment, gang activity, and occasional violent crime According to UN-Habitat (2012), the security issues in Burns Creek have negatively impacted the local economy, hindering business investment, tourism, and employment opportunities.

Auki, the provincial capital of Malaita and the second largest town in the country, is flanked by the settlements of Lilisiana and Ambu, located on the north and south sides of Auki harbor Both villages, home to residents from Langa Langa Lagoon, feature coastal dwellings, many on stilts within mangroves that flood during high tide, as well as houses built on artificial lagoons made from coral and stone The primary sources of income for these communities are fish sales at the local market and employment in nearby businesses However, they face significant challenges, including poor access to water and sanitation, limited electricity connectivity, and a land dispute that restricts crop planting, forcing some households to rely solely on the reef for food and income Lilisiana lacks a fresh water source and depends on piped water, while Ambu has a spring; during the research, unpaid water bills led to a water supply cut in Lilisiana, necessitating residents to paddle across the harbor to access fresh water in Ambu.

The Guadalcanal Plains, located approximately 30 kilometers east of Honiara, benefit from easy access via the Kukum Highway, which supports regular bus services This relatively flat and dry region is ideal for agriculture, making it the primary area for palm oil cultivation and processing in the Solomon Islands since the 1970s, alongside other cash crops like copra and cocoa The Guadalcanal Plains Palm Oil Limited (GPPOL) has been the main economic driver since its establishment in 2005, following the rehabilitation of an abandoned mill The company has positively impacted local households, providing income through land leases, employment opportunities, and out-growing arrangements where families sell palm fruit to GPPOL This transition to outgrowing has significantly contributed to the rapid growth of palm oil production and increased household incomes, aligning with rising palm oil prices.

The Oa and Mariuapa communities are situated on the Weather Coast in the southeast corner of Guadalcanal, an area identified by AusAID as one of the most disadvantaged in the Solomon Islands, facing limited opportunities for development (Jansen et al 2006, p17) These communities, located on the windward side, are surrounded by the rugged Guadalcanal mountain range and the turbulent Solomon Sea, experiencing frequent heavy rainfall Their isolation from larger population centers and markets results in predominantly subsistence-based livelihoods, with only minimal cash-crop and livestock production Trade and transport heavily depend on infrequent shipping, as volatile seas and the absence of structural wharves hinder boat arrivals Consequently, small outboard motorboats are essential for navigating rough waters to deliver goods at small jetties and beach landings within each community (SIMPGRD, 2001, p17).

The villages near Malu’u, located approximately 80 kilometers north of Auki in North Malaita, were surveyed and found to be densely populated, housing around 4,300 residents This area serves as one of only three sub-stations for the Malaitan Provincial Government and is well-equipped with essential public services, including a hospital, schools, a central market, and a jail.

Malu’u is a significant agricultural hub in Malaita, known for its production of copra and cocoa Its role in copra farming and livestock is comparable to that of Hog Harbour in Vanuatu, although Malu’u faces challenges with transport access to Auki due to poorly maintained roads that are susceptible to flooding and coastal erosion Additionally, the community has hydroelectricity infrastructure that has remained inactive since "The Tensions."

Introduction

Poverty is commonly defined as a level of material well-being that falls below an acceptable minimum threshold Poverty measures play a crucial role in identifying individuals who are poor and summarizing this information into statistics These measures are essential for vulnerability analyses, as they assess the risk of individuals falling into poverty in the future Accurate poverty measurement is vital for effectively targeting social protection policies, aimed at both alleviating current poverty and preventing its future occurrence.

Poverty is typically assessed using a standard that reflects the financial resources required to sustain a basic standard of living In many developing nations, this standard is defined by the extreme poverty line, set at the local-currency equivalent of US$1.25 per day This benchmark offers a reliable and objective measure of individuals who do not have sufficient financial means to fulfill their essential human needs.

Poverty in Pacific Island Countries (PICs), such as Vanuatu and the Solomon Islands, presents unique characteristics compared to other developing nations Notably, these regions experience less severe destitution and hunger commonly associated with extreme monetary poverty.

While extreme poverty may not be a prominent issue in the Pacific Islands, various human development metrics indicate that living conditions in Pacific Island Countries (PICs) are comparable to some of the world's poorest nations Consequently, poverty in the region has been redefined in terms of relative "hardship," a perspective widely accepted and implemented in national poverty lines These lines are designed to reflect the cost of a minimally nutritious diet along with basic non-food necessities, tailored to specific locations rather than adhering to a standardized measure of absolute poverty.

The national poverty lines of Vanuatu and Solomon Islands have faced criticism for inaccurately reflecting the geographical distribution of poverty between urban and rural areas Relying solely on monetary measures as indicators of well-being fails to capture essential non-market production and exchange that support household livelihoods, especially in rural regions where markets for vital services may be absent.

The disparity between the absence of extreme poverty and the low human development levels, along with the differences between rural and urban regions, raises questions about the effectiveness of using simple monetary measures to assess poverty in Melanesia.

This chapter posits that multidimensional measures focusing on human capabilities and functioning are more effective for assessing poverty in Vanuatu and the Solomon Islands, as well as for comparing living standards between urban and rural areas It utilizes data from a household survey in both nations to replicate the Multidimensional Poverty Index (MPI), a prominent non-monetary poverty measure developed by Alkire and Foster (2011a) Notably, this is the inaugural reporting of the MPI for the Solomon Islands and the first instance of its application at the sub-national level in either country.

This chapter not only assesses the incidence, depth, and geographical distribution of Multidimensional Poverty Index (MPI) poverty in Vanuatu and the Solomon Islands but also adapts the MPI to better reflect the local Melanesian context The newly developed Melanesian MPI (MMPI) offers a more precise understanding of household poverty by integrating essential aspects of well-being specific to Melanesian culture that are often neglected in the traditional MPI framework.

This chapter is structured as follows: Section 3.2 reviews existing literature on poverty in the Pacific and examines multidimensional poverty measures In Section 3.3, the Multidimensional Poverty Index (MPI) is calculated for each of the twelve surveyed communities, followed by the computation of the Modified Multidimensional Poverty Index (MMPI) Section 3.4 discusses the findings, and Section 3.5 provides a conclusion.

Literature review

3.2.1 Poverty measures and their applicability to PICs

Poverty is defined as a level of material well-being that falls below a socially accepted minimum standard (Ravallion, 1992) It signifies the least acceptable level of economic participation within a society (Hagenaars and De Vos, 1988; Ray, 1998) Typically, poverty is assessed in monetary terms, focusing on income or consumption Two fundamental assumptions support these monetary assessments: first, that money can universally convert into fulfilling individual needs, and second, that monetary well-being is closely linked to other aspects of well-being (Ataguba et al., 2013).

Santos (2013) describes monetary-based approaches to poverty measurement as "indirect," contrasting them with "direct" measures that assess the actual failures of the poor to achieve minimum living standards Chambers (2007) highlights that although poverty measures are often reductionist and lack context, their simplicity and quantifiable nature make them appealing to policymakers, allowing for comparisons across different times and locations.

Haughton and Khandker (2009) highlight four key reasons for the importance of quantifying poverty Firstly, credible poverty measures draw policymakers' attention to the living conditions of the poor, preventing their statistical invisibility Secondly, identifying the poor is essential for effectively targeting poverty alleviation policies Thirdly, poverty analyses are crucial for evaluating the success of initiatives aimed at assisting impoverished populations Lastly, these measures serve as benchmarks for assessing the effectiveness of international efforts, such as the Millennium Development Goals (MDGs).

Accurate poverty measurement is crucial for evaluating household vulnerability, as it helps assess the likelihood of a household falling into poverty or remaining in it A reliable and consistent indicator of poverty in a specific context is essential for credible vulnerability estimates, which will be discussed in Chapter 6.

The World Bank emphasizes that measuring poverty is crucial for policymakers as it reveals the spatial distribution of well-being In its 2009 World Development Review focused on this subject, the World Bank highlighted the significance of economic geography in understanding these dynamics.

In developing countries, consumption is often favored over income as an indicator of well-being due to the challenges in accurately measuring income, which is frequently sourced from domestic agriculture (Haughton and Khandker, 2011, p 190).

33 Qualitative participatory approaches using information on peoples’ lived experiences are also used to characterise poverty (Chambers,

In the analysis of poverty, quantitative economic approaches are predominant, despite the prominence of anthropological perspectives A key factor influencing the uneven distribution of economic activity and poverty across regions is the accessibility to markets and infrastructure, which affects the movement of goods, services, labor, capital, and ideas Accurately measuring poverty is essential for effectively calibrating anti-poverty policies, which play a crucial role in reducing regional inequalities and accelerating the convergence of living standards.

According to Sen (1976), a credible poverty measure has two key dimensions: the ability to identify the poor within the total population and to aggregate this information into a meaningful metric It is essential for a poverty measure to accurately determine who is considered poor, typically defined against a benchmark known as the poverty line Poverty lines can be viewed in absolute terms, where they remain fixed based on living standards, or in relative terms, where they are adapted to the specific context and can be adjusted as conditions evolve (Ravallion, 1992, p 25).

Absolute poverty measures are predominantly utilized in developing countries due to the significant levels of destitution present in these regions The international poverty line, set at US$1.25 per day and adjusted for local currency using Purchasing Power Parity (PPP) rates, serves as the most recognized absolute poverty measure This benchmark is derived from the average national poverty lines of the 15 poorest countries based on consumption per capita It effectively highlights the conditions of the poorest individuals, reflecting extreme poverty and the lack of essential human needs, thus providing a crucial, internationally comparable metric for assessing extreme poverty and a key target for the Millennium Development Goals (MDGs).

In many Pacific Island Countries (PICs), such as Vanuatu and the Solomon Islands, extreme monetary poverty is uncommon due to the widespread practice of domestic food cultivation and established informal safety nets.

34 Distance, in this context, is an economic rather than Euclidean (spatial) concept

This article updates the original research by Ravallion et al (1991), which established an international poverty line of $31 per month in 1985 US dollars (PPP) The authors identified this figure as a representative threshold for low-income countries, categorizing it as a measure of "extreme poverty." This benchmark is widely recognized as the $1-a-day poverty line.

Target 1a of the Millennium Development Goals aims to reduce the proportion of people living on less than $1 a day, adjusted for purchasing power parity (PPP), by half between 1990 and 2015, ensuring that resources are allocated to those in need (Abbott and Pollard, 2004) The combination of fertile lands, the importance of domestic agriculture in local diets, and the absence of extreme poverty has led some researchers to describe households in Pacific Island Countries (PICs) as experiencing "subsistence affluence" (PIFS, 2012; UNESCAP, 2004) Originally introduced by Fisk (1971) to characterize the economic conditions of rural farmers in Papua New Guinea, this term has since expanded to encompass other regions of Melanesia, highlighting that subsistence producers possess abundant environmental resources and the capacity to apply labor selectively to meet their needs as they arise.

The term "subsistence affluence" is debated among scholars According to Cox et al (2007, p 4), it supports household resilience and offers protection against material hardship and social unrest, although this effect is primarily observed in rural areas In contrast, Morris presents a differing perspective.

The term in question is criticized for being based on limited evidence and lacking empirical validity (2011, p4) Jayaraman (2004, p3) highlights that it has been overly romanticized in the region, despite the reality of limited access to essential infrastructure and income disparities Morris (2011, p4) points out the significant gap between the notion of "subsistence affluence" and the poor social indicators observed in many Pacific Island Countries (PICs) Although Vanuatu and Solomon Islands report low extreme poverty rates, they exhibit several development characteristics similar to nations with high poverty levels The UN's Human Development Index (HDI) places Vanuatu in the poorest third of countries and Solomon Islands in the lowest quarter, with the latter classified as having "Low Human Development." Instances of malnutrition and hunger, though infrequent, are also documented (MICS).

In 2007, both Vanuatu and the Solomon Islands were not on track to fulfill their Millennium Development Goals (MDGs) commitments (PIFS, 2013) Additionally, significant structural changes driven by rising urbanization and monetization in these countries have rendered the previously existing "subsistence affluence" irrelevant for many households For a more in-depth analysis of these structural shifts, refer to Chapter 4.

Multidimensional Poverty Indices for households in Vanuatu and Solomon

A household survey aimed at measuring the Multidimensional Poverty Index (MPI) was conducted across twelve communities in Vanuatu and the Solomon Islands This survey gathered data on various deprivation indicators included in the MPI, excluding malnutrition due to the challenges of obtaining accurate anthropometric measurements According to Alkire and Santos (2010), health is the most challenging aspect of poverty to quantify, and household surveys often lack comparable health indicators for all members Consequently, a proxy measure was utilized to assess the presence of malnourished adults in the household, relying on information related to food security.

52 Recall, the nutrition deprivation cut off in the index is if any adult or child for whom there is nutritional information is malnourished (Alkire,

In the context of the Multidimensional Poverty Index (MPI), adults are classified as malnourished if their Body Mass Index (BMI) falls below 18.5 m/kg² The BMI is derived from weight and height measurements, which were not allowed during the household survey This survey aimed to assess the relationship between food insecurity and malnutrition, supported by research indicating a strong connection between the two The US Food Security Module, utilized in the survey, serves as a cost-effective and user-friendly tool for evaluating food insecurity and has been effectively adapted across diverse cultural and linguistic contexts, particularly in Asia and the Pacific.

The indicator of food security assessed was whether any adult in the household went an entire day without food due to financial constraints Experiencing a full day without food indicates severe food insecurity, especially in regions like Vanuatu and the Solomon Islands, where subsistence agriculture and strong social networks are prevalent If a household member cannot rely on traditional coping mechanisms for a day, it likely signifies acute food insecurity Adults were selected as the primary focus for this assessment, as the original index considers malnutrition among "any adult or child." This choice reflects the understanding that parents typically prioritize their children's needs, suggesting that if a child has gone without food, the adults likely have as well, but the reverse may not hold true.

Alkire and Santos (2010) emphasize that to maintain international comparability of the Multidimensional Poverty Index (MPI), only generic data can be utilized, leading to the exclusion of significant local factors affecting well-being This is especially relevant in regions like Melanesia, where a fertile environment and robust social support systems mitigate absolute poverty, while limited access to essential services shapes perceptions of hardship Despite their importance, these critical elements are not considered in the standard MPI calculation.

Malnutrition can arise even with a high BMI, highlighting that obesity is a significant health issue in developing countries, including PICs Notably, the calculation of the Multidimensional Poverty Index (MPI) does not account for obesity, and the household survey lacked a tool to measure this condition.

Alkire and Foster (2011b, p 291) describe the Multidimensional Poverty Index (MPI) as a "generalized framework for measuring multidimensional poverty." They emphasize that this flexibility allows the MPI to be particularly effective for country-level assessments, while also highlighting that choices regarding dimensions, cut-offs, and weights can be tailored to the specific goals of the measure and reflect normative judgments about poverty.

The Alkire and Foster framework methodology has been adapted to assess local well-being across various countries In Bhutan, the Gross National Happiness Index enhances traditional welfare metrics by incorporating cultural, psychological, and economic resilience factors Mexico's multidimensional poverty index reflects social rights and economic well-being as outlined in the Constitution, categorizing individuals based on their economic status and access to social rights Nepal is developing a Multidimensional Exclusion Index that includes indicators of agency and influence Additionally, participatory methods have been employed to determine relevant deprivation indicators, such as in Darfur, Sudan, where aid workers and local parents contributed to identifying child poverty indicators, and in El Salvador, where focus groups are working to establish a national multidimensional poverty measure.

This chapter enhances the Multidimensional Poverty Index (MPI) by creating a Melanesian Multidimensional Poverty Index (MMPI) that incorporates a new welfare dimension focused on "access." This approach aligns with Abbott and Pollard’s (2004) view that poverty in the Pacific is characterized by a lack of opportunities and limited access to essential services, rather than mere destitution The access dimension includes three key indicators of poverty relevant to the region's well-being literature: the presence of a produce garden, a robust social support network, and access to vital services.

In adapting the Multidimensional Poverty Index (MPI) to reflect local characteristics, this research closely follows the established MPI methodology Alkire (2008) highlights various approaches for constructing multidimensional poverty indices, particularly in selecting indicators and their corresponding weights The chosen indicators are objective, quantifiable, and have clearly-defined thresholds, allowing for binary categorization Due to the lack of reliable empirical data for determining an appropriate weighting structure, the existing MPI methodology is considered the most suitable Each of the four dimensions of well-being in the Modified Multidimensional Poverty Index (MMPI)—health, education, standard of living, and access—receives equal weighting of one quarter, as opposed to the one third allocated to the three dimensions in the conventional MPI The poverty cutoff of one third is also maintained.

Table 3.2: Melanesian Multidimensional Poverty Index (MMPI)

Dimensions, indicators, deprivation thresholds (weights in parentheses)

Child mortality (1/8) Any child has died in the family

Nutrition (1/8) Any adult or child for whom there is nutritional information is malnourished.*

Years of schooling (1/8) No household member has completed five years of schooling School attendance (1/8) Any school-aged child is not attending school in years 1 to 8

Electricity (1/24) The household has no electricity

The household´s sanitation facility is not improved (according to the MDG guidelines**), or it is improved but shared with other households

The household does not have access to clean drinking water (according to the MDG guidelines**) or clean water is more than a 30 minute walk from home

Floor (1/24) The household has dirt, sand or dung floor

Cooking fuel (1/24) The household cooks with dung, wood or charcoal

The household does not own more than one of: radio, TV, telephone, bike, motorbike or refrigerator, and does not own a car or truck

Garden (1/12) The household does not have access to a garden

Social support (1/12) Household has no one to rely upon in a time of financial difficulty

Services (1/12) > 30 minutes travelled to health clinic or secondary school or central market

A household is considered deprived if any adult in the home responds affirmatively to the question, "Did you or any other adults in the house not eat food for an entire day because there wasn’t enough money to buy food?" This proxy measure serves as an important indicator of food insecurity within the household.

** See WHO/UNICEF (2010) for more details

Source: Author, modified from Alkire (2011)

An alternative approach to the MMPI could integrate the three indicators of the 'access' dimension into the existing MPI dimensions This integration would prevent the need to reduce the weights of the current dimensions, especially in health and education Exploring the benefits of different MMPI specifications presents a promising avenue for future research.

The remaining part of this section provides additional information on each of the individual deprivation indicators in the access dimension

Gardens play a vital role in the households of Vanuatu and the Solomon Islands, deeply intertwined with Melanesian culture through both the produce they yield and the gardening practices themselves Households lacking access to a garden are disconnected from this essential cultural activity and must depend on the cash economy or favors from extended family for their food Consequently, a household is deemed deprived if it does not have access to a garden.

Strong social support networks and reciprocity are essential features of the informal safety net in Melanesia, despite evidence of their decline A household's inability to rely on others during times of need indicates exclusion from risk-sharing networks, leading to deprivation of the benefits provided by informal social security Research shows that gifts and remittances are often distributed through social networks rather than as general insurance Households were surveyed on the number of individuals they could depend on outside their household during financial difficulties; those who reported zero were deemed deprived in terms of social support While there is no objective measure of financial hardship, this indicator reflects the strength of the local safety net and the protection it offers to households.

The remoteness of essential services, such as education and healthcare, significantly contributes to hardship in the Pacific, as highlighted by the ADB’s PAH (Abbott and Pollard, 2004) This remoteness arises from the geographical distance of many villages from urban centers, combined with inadequate transport networks and funding constraints faced by policymakers, which restrict the availability of essential services in rural areas (Cox et al 2007) Furthermore, limited access to centralized markets hampers individuals' ability to buy and sell a variety of goods and services.

The decision was made to set the deprivation threshold at zero, avoiding arbitrary selection of a network size, which helps mitigate measurement errors Although individuals may be unaware of their network's size during difficult times, they can typically recognize whether a network exists This limitation affects the availability and pricing of basic goods, consequently restricting income-earning opportunities.

Discussion

The MPI is an absolute (though non-monetary) measure of household poverty that is based on Sen’s capabilities approach It therefore focuses directly on the actual failures of poor

Not Poor or Vulnerable (MPI < 0.20) Vulnerable (0.20 < MPI ≤ 0.33)

Less Severe Poor (0.33 < MPI ≤ 0.50) Severe Poor (MPI ≥ 0.50)

In Vanuatu and the Solomon Islands, where non-market transactions and the absence of essential service markets complicate monetary poverty measurement, the Multidimensional Poverty Index (MPI) is more effective than traditional monetary-based approaches By focusing on households meeting minimum standards rather than relying on indirect financial indicators, the MPI provides a clearer understanding of poverty in these contexts.

This analysis evaluates Multidimensional Poverty Indices (MPIs) across six distinct communities in Vanuatu and the Solomon Islands, offering valuable insights into the prevalence, severity, and spatial distribution of household poverty in each nation The findings enable comparisons with corresponding geographic data from official poverty statistics.

The findings help clarify the discrepancy between the observed lack of extreme poverty in Vanuatu and the Solomon Islands and their low human development scores The Multidimensional Poverty Index (MPI) analysis indicates that a significant number of households in urban squatter settlements are experiencing poverty, aligning with basic needs measures Unlike monetary-based assessments that focus on urban areas, the MPI reveals a more complex geographical distribution of poverty, highlighting its prevalence in both inner urban squatter settlements and remote communities This creates a distinctive "U-shaped" curve of poverty when communities are ranked by their remoteness.

The enhancement of the Multidimensional Poverty Index (MPI) through the Multidimensional Multidimensional Poverty Index (MMPI) has significantly improved the understanding of poverty in Vanuatu and the Solomon Islands This development aligns with a growing trend to contextualize the MPI across various regions Notably, the application of the MMPI revealed changes in poverty rates, indicating that access to essential services, gardens, and community support plays a crucial role in identifying poverty locally Additionally, many households previously classified as non-poor by the MPI were reclassified as poor under the MMPI, underscoring its unique value The persistent "U-shape" of poverty, observed when communities are organized by remoteness according to the MMPI, further confirms the robustness of these findings.

These results have three important policy implications

Poverty remains a critical policy challenge in Vanuatu and the Solomon Islands, with national estimates of Multidimensional Poverty Index (MPI) aligning with countries of similar human development levels, despite low levels of extreme monetary poverty The analysis reveals that while severe poverty is limited, overall poverty is widespread, with a significant portion of the population classified as near-poor, surpassing the number of poor households This finding aligns with the vulnerability analysis presented in Chapter 6, highlighting that addressing vulnerability, alongside current poverty, is essential for effective social protection policies.

The findings indicate that traditional views of poverty are inadequate in Vanuatu and the Solomon Islands Monetary measures effectively identify urban poverty but fall short in rural contexts Conversely, the notion of "subsistence affluence" fails to accurately represent living standards in rural areas, as it overlooks the growing influence of the cash economy Households increasingly rely on cash incomes to cover essential expenses like fuel, school fees, and clothing, highlighting the need for a more nuanced understanding of rural poverty This situation, characterized by rising cash demands and limited economic opportunities, alongside the concentration of government services in urban centers, embodies the "hardship" described by Abbott and Pollard (2004) in Pacific Island Countries (PICs).

The analysis reveals that rural areas are diverse, with economic geography significantly influencing the levels and severity of rural poverty Communities that are predominantly rural but have strong transport connections to larger markets experience the lowest headcount poverty rates in both countries Conversely, remote rural communities face some of the highest poverty rates.

Rural and well-connected communities thrive due to their access to abundant land and minimal barriers to market entry These areas are positioned in a Melanesian "sweet spot," where "subsistence affluence" meets strong connections to larger, more diverse markets.

Effective transport significantly reduces economic distance to major centers, benefiting households in well-connected communities compared to those in remote areas Research by Gibson and Nero (2003) indicates that market interconnectedness in Papua New Guinea enhances economic returns from production while lowering consumable prices Improved spatial integration enables households to transition from subsistence production to new income sources, increasing disposable income for essential expenditures like food, education, and transport Additionally, better transport links lower the costs of accessing vital services such as healthcare and education, contributing to lower rates of non-monetary deprivation in these regions.

The MPI, along with the MMPI, faces several criticisms, particularly regarding its transparency and weighting structure The selective sampling of urban squatter communities may skew national poverty rates Despite these issues, the MPI is increasingly recognized as a vital measure of household poverty, as reflected in its annual inclusion in the UNDP's HDR Notably, most Pacific Island Countries (PICs), including the Solomon Islands, are absent from this annual report, and no PIC has had the MPI assessed at a sub-national level This analysis represents a significant advancement in understanding multidimensional poverty in the Pacific and Melanesia, while also critiquing the effectiveness of basic needs approaches for measuring rural poverty.

Conclusion

Multidimensional measures like the MPI and MMPI are essential for identifying poverty in Vanuatu and the Solomon Islands, enhancing the range of well-being metrics available These tools should be integrated into the toolkits of poverty analysts to provide a more comprehensive understanding of poverty in the region.

This analysis of poverty incidence and depth in Vanuatu and the Solomon Islands reveals critical insights into the poverty issue that traditional measures may overlook The findings highlight the unique characteristics of poverty in these regions, providing a deeper understanding of the challenges faced by their populations.

Improved spatial integration with markets and social networks enhances risk mitigation and diversification The geographical distribution of poverty reveals nuanced differences at the sub-national level in both countries, as discussed in Fafchamps et al (1998) and Section 5.2.1 of Chapter 5.

The findings emphasize the importance of using alternative non-monetary poverty measures to effectively target social protection policies geographically While national assessments of basic needs poverty suggest prioritizing resources for urban areas, both the Multidimensional Poverty Index (MPI) and the Modified Multidimensional Poverty Index (MMPI) indicate that attention should also be directed towards urban-settler and remote communities.

The geographical distribution of poverty can be effectively analyzed through the decomposition of the Multidimensional Poverty Index (MPI) and the Modified Multidimensional Poverty Index (MMPI) into sub-groups and intensity levels These measures are essential for targeting social protection policies within specific regions, as they identify households in severe poverty that require immediate support Additionally, they help pinpoint near-poor households, which, while currently non-poor, are at risk of falling into poverty due to adverse shocks.

The MMPI has significant potential as a comprehensive measure of poverty in Melanesia, as it aligns closely with local well-being priorities Currently, it serves as a valuable initial effort to enhance the MPI's relevance in this region, drawing on Pacific well-being literature Future research should aim to refine the MMPI, particularly addressing the subjective nature of the support indicator and the weights assigned to each indicator Calibration efforts should focus on reflecting the values of local citizens, similar to the approach taken in El Salvador, where the community defines relevant indicators Additionally, it is crucial to consider the ongoing initiatives that develop indigenous well-being indicators in the local context.

THE EXPOSURE OF HOUSEHOLDS TO ECONOMIC AND OTHER

RESILIENCE IN VANUATU AND SOLOMON ISLANDS: HOUSEHOLDS’ RESPONSES TO GLOBAL MACROECONOMIC SHOCKS

HOUSEHOLD VULNERABILITY TO POVERTY IN VANUATU AND

CONCLUSION AND POLICY RECOMMENDATIONS