Poor People and Risky Business

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Poor People and Risky Business

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Hernando Zuleta ()

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Hernando Zuleta

Abstract

We try to explain why economic conflicts and illegal business often take place in poor countries. We use the concept of subsistence level of consumption (d) and assume a regular concave utility function for consumption levels higher than d. For consumption levels lower than d utility is constant and equal to zero. Under this framework poor agents are risk-lovers. This result helps to explain why economic conflicts are more likely to appear in poor economies and why poor agents are more willing to undertake illegal business.

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Paper provided by UNIVERSIDAD DEL ROSARIO - FACULTAD DE ECONOMÍA in its series DOCUMENTOS DE TRABAJO with number 003356.

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Length: 12
Date of creation: 01 Oct 2006
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Handle: RePEc:col:000092:003356

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This paper has been announced in the following NEP Reports:

NEP-ALL-2007-09-02 (All new papers)
NEP-UPT-2007-09-02 (Utility Models & Prospect Theory)

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Other versions:
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