Poverty and vulnerability in the Punjab, Pakistan: A multilevel analysis

•Vulnerability to poverty is not just a rural phenomenon in Pakistan.•Vulnerability is mainly driven by low consumption prospects rather than high consumption volatility.•Vulnerability to idiosyncratic shocks is higher than vulnerability to covariate shocks.

This study estimates the prevalence and extent of vulnerability to poverty in the Punjab province of Pakistan. A multilevel model is used to analyze survey data of about 90,000 households distributed across 150 towns/tehsils. Empirical estimates show that the vulnerability rate is higher than the rate of poverty, and poverty-induced vulnerability is higher than risk-induced vulnerability. Moreover, idiosyncratic-vulnerability is higher than covariate-vulnerability. Unlike previous studies that find poverty to be a rural phenomenon, this research shows that poverty and vulnerability are equally high in urban areas. A high level of urban vulnerability adds urgency to anti-poverty interventions given a rapid urbanization in Pakistan.