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Vulnerability, risk management and agricultural development

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  • Fafchamps, Marcel

Abstract

This paper examines the relationship between agricultural development, vulnerability to shocks and the risk management practices of small farmers in developing countries. Economic thinking on technology adoption has long been influenced by a model of a rational but risk-averse farmer. Experimental evidence suggests that aversion to downside risk is a better representation of human preferences than aversion to risk per se. The prescribed solution, no matter what kind of risk the farmer is concerned about, is to offer insurance. Recent field experiments indicate that other behavioral considerations play a role as well, such as impulse purchases and vulnerability to marketing campaigns. This may explain why adoption of agricultural innovations is often gradual and displays patterns consistent with peer effects through social networks and geographical proximity.

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File URL: http://purl.umn.edu/156662
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Bibliographic Info

Article provided by African Association of Agricultural Economists in its journal African Journal of Agricultural and Resource Economics.

Volume (Year): 05 (2010)
Issue (Month): 1 (September)
Pages:

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Handle: RePEc:ags:afjare:156662

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Related research

Keywords: agricultural development; technology adoption; risk management; downside risk; farmer behavior; sub-Saharan Africa; International Development; Risk and Uncertainty; O33; Q12; Q18;

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References

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Citations

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Cited by:
  1. Rijkers, Bob & Söderbom, Måns, 2013. "The Effects of Risk and Shocks on Non-Farm Enterprise Development in Rural Ethiopia," World Development, Elsevier, vol. 45(C), pages 119-136.
  2. Chiwaula, Levison & Waibel, Hermann, 2011. "Does seasonal vulnerability to poverty matter? A case study from the Hadejia-Nguru Wetlands in Nigeria," Proceedings of the German Development Economics Conference, Berlin 2011 19, Verein für Socialpolitik, Research Committee Development Economics.
  3. Belhaj, Mohamed & Deroïan, Frédéric, 2012. "Risk taking under heterogenous revenue sharing," Journal of Development Economics, Elsevier, vol. 98(2), pages 192-202.
  4. Godlonton, Susan, 2014. "Employment risk and job-seeker performance:," IFPRI discussion papers 1332, International Food Policy Research Institute (IFPRI).

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