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Growth and Risk: Methodology and Micro Evidence Author info | Abstract | Publisher info | Download info | Related research | Statistics Chris Elbers
Jan Willem Gunning
Bill Kinsey
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How exposure to risk affects economic growth is a key issue in development. This article quantifies both the ex ante and ex post effects of risk using long-running panel data for rural households in Zimbabwe. It proposes a simulation-based econometric methodology to estimate the structural form of a micro model of household investment decisions under risk. The key finding is that risk substantially reduces growth in this particular setting: the mean capital stock in the sample is (in expectation) 46 percent lower than in the absence of risk. About two-thirds of the impact of risk is due to the ex ante effect (that is, the behavioral response to risk), which is usually not taken into account in policy design. These results suggest that policy interventions that reduce exposure to shocks or that help households manage risk could be much more effective than is commonly thought. Copyright 2007, Oxford University Press.
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Article provided by Oxford University Press in its journal The World Bank Economic Review .
Volume (Year): 21 (2007)
Issue (Month): 1 ()
Pages: 1-20
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Handle: RePEc:oup:wbecrv:v:21:y:2007:i:1:p:1-20Contact details of provider: Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK Fax: 01865 267 985 Email: Web page: http://wber.oxfordjournals.org/
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Chris Elbers & Jan Willem Gunning, 2002.
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Cesar Calvo & Stefan Dercon, 2005.
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Kenneth Harttgen & Isabel Günther, 2007.
"Estimating Vulnerability to Covariate and Idiosyncratic Shocks ,"
Ibero America Institute for Econ. Research (IAI) Discussion Papers
154, Ibero-America Institute for Economic Research.
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Chris Elbers & Jan Willem Gunning & Lei Pan, 2007.
"Insurance and Rural Welfare: What can Panel Data tell us? ,"
Tinbergen Institute Discussion Papers
07-011/2, Tinbergen Institute.
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Other versions: Tse-Ling Teh & Alan Martina, 2008.
"Developing Countries Spreading Covariant Risk Into International Risk Markets: Subsidised Catastrophe Bonds Or Reinsurance, Or Disaster Assistance? ,"
ANUCBE School of Economics Working Papers
2008-492, Australian National University, College of Business and Economics, School of Economics.
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Stefan Dercon, 2004.
"Growth and Shocks: evidence from rural Ethiopia ,"
Development and Comp Systems
0409036, EconWPA.
[Downloadable!]
Other versions: Frederick van der Ploeg & Steven Poelhekke, 2007.
"Volatility, Financial Development and the Natural Resource Curse ,"
Economics Working Papers
ECO2007/36, European University Institute.
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Other versions: Steven Poelhekke, 2008.
"Urban Growth, Uninsured Risk, and the Rural Origins of Aggregate Volatility ,"
Economics Working Papers
ECO2008/26, European University Institute.
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Stefan Dercon (QEH), .
"Vulnerability: a micro perspective ,"
QEH Working Papers
qehwps149, Queen Elizabeth House, University of Oxford.
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Chris Elbers & Jan Willem Gunning, 2004.
"Transitional Growth and Income Inequality: Anything Goes ,"
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Stefan Dercon (QEH), .
"Risk, Growth and Poverty: what do we know, what do we need to know? ,"
QEH Working Papers
qehwps148, Queen Elizabeth House, University of Oxford.
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Molini, Vasco Michiel & Keyzer, Michiel & van den Boom, Bart & Zant, Wouter, 2007.
"Creating safety nets through semi-parametric index-based insurance: A simulation for Northern Ghana ,"
101st Seminar, July 5-6, 2007, Berlin Germany
9263, European Association of Agricultural Economists.
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