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Poor People and Risky Business

  • Zuleta Hernando


    (Universidad del Rosario)

We 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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Article provided by De Gruyter in its journal Peace Economics, Peace Science, and Public Policy.

Volume (Year): 14 (2008)
Issue (Month): 1 (April)
Pages: 1-18

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Handle: RePEc:bpj:pepspp:v:14:y:2008:i:1:n:5
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