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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.

Suggested Citation

  • Fafchamps, Marcel, 2010. "Vulnerability, risk management and agricultural development," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), September.
  • Handle: RePEc:ags:afjare:156662
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    Citations

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    Cited by:

    1. Godlonton, Susan, 2014. "Employment risk and job-seeker performance:," IFPRI discussion papers 1332, International Food Policy Research Institute (IFPRI).
    2. You, Jing, 2014. "Risk, under-investment in agricultural assets and dynamic asset poverty in rural China," China Economic Review, Elsevier, vol. 29(C), pages 27-45.
    3. repec:bla:afrdev:v:29:y:2017:i:2:p:169-183 is not listed on IDEAS
    4. repec:eee:wdevel:v:98:y:2017:i:c:p:447-466 is not listed on IDEAS
    5. 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.
    6. Belhaj, Mohamed & Deroïan, Frédéric, 2012. "Risk taking under heterogenous revenue sharing," Journal of Development Economics, Elsevier, vol. 98(2), pages 192-202.
    7. Bishu, Kinfe & O'Reilly, Seamus & Lahiff, Edward & Steiner, Bodo, 2016. "Cattle farmers’ perceptions of risk and risk management strategies," MPRA Paper 74954, University Library of Munich, Germany.
    8. Rashida Haq, 2015. "Shocks as a Source of Vulnerability: An Empirical Investigation from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(3), pages 245-272.
    9. 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.
    10. Maria Waldinger, 2015. "The economic effects of long-term climate change: evidence from the little ice age," GRI Working Papers 214, Grantham Research Institute on Climate Change and the Environment.

    More about this item

    Keywords

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

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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