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Vulnerability, Risk Management, and Agricultural Development

  • Marcel Fafchamps

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://www.csae.ox.ac.uk/workingpapers/pdfs/2009-11text.pdf
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Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2009-11.

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Date of creation: 2009
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Handle: RePEc:csa:wpaper:2009-11
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  1. Takashi Kurosaki & Marcel Fafchamps, 1997. "Insurance Market Efficiency and Crop Choices in Pakistan," Working Papers 97010, Stanford University, Department of Economics.
  2. H. Peyton Young & Mary A. Burke, 2001. "Competition and Custom in Economic Contracts: A Case Study of Illinois Agriculture," American Economic Review, American Economic Association, vol. 91(3), pages 559-573, June.
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  6. MICHAEL R. CARTER & Frederic Zimmerman, 1998. "The Dynamic Cost and Persistence of Asset Inequality in an Agrarian Economy," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 416, Wisconsin-Madison Agricultural and Applied Economics Department.
  7. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2007. "Returns to capital in microenterprises : evidence from a field experiment," Policy Research Working Paper Series 4230, The World Bank.
  8. Deaton, A., 1992. "Saving and Income Smoothing in Cote d'Ivoire," Papers 156, Princeton, Woodrow Wilson School - Development Studies.
  9. Ashraf, Nava & Gine, Xavier & Karlan, Dean, 2008. "Finding missing markets (and a disturbing epilogue) : evidence from an export crop adoption and marketing intervention in Kenya," Policy Research Working Paper Series 4477, The World Bank.
  10. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  11. Shawn Cole & Xavier Gine & Jeremy Tobacman & Petia Topalova & Robert Townsend & James Vickery, 2013. "Barriers to Household Risk Management: Evidence from India," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 104-35, January.
  12. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
  13. Griliches, Zvi, 1988. "Productivity Puzzles and R&D: Another Nonexplanation," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 9-21, Fall.
  14. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
  15. Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
  16. Richard Akresh, 2004. "Adjusting Household Structure: School Enrollment Impacts of Child Fostering in Burkina Faso," Working Papers 897, Economic Growth Center, Yale University.
  17. Marcel Fafchamps & Bereket Kebede, 2008. "Subjective well-being, disability and adaptation: A case study from rural Ethiopia," CSAE Working Paper Series 2008-01, Centre for the Study of African Economies, University of Oxford.
  18. Harold Alderman & John Hoddinott & Bill Kinsey, 2004. "Long Term Consequences Of Early Childhood Malnutrition," HiCN Working Papers 09, Households in Conflict Network.
  19. Shaban, Radwan Ali, 1987. "Testing between Competing Models of Sharecropping," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 893-920, October.
  20. Fafchamps, Marcel & Udry, Christopher & Czukas, Katherine, 1998. "Drought and saving in West Africa: are livestock a buffer stock?," Journal of Development Economics, Elsevier, vol. 55(2), pages 273-305, April.
  21. Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
  22. Dean Karlan & Nava Ashaf & Wesley Yin, 2004. "Tying odysseus to the mast: Evidence from a commitment savings product in the philippines," Natural Field Experiments 00206, The Field Experiments Website.
  23. Oriana Bandiera & Imran Rasul, 2002. "Social Networks and Technology Adoption in Northern Mozambique," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 35, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  24. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  25. Jonathan Conning, 2001. "Of Pirates and Moneylenders: Product Market Competition and the Depth of Lending relationships in a rural market in Chile," Department of Economics Working Papers 2000-08, Department of Economics, Williams College.
  26. Mark Rosenzweig & Andrew D. Foster, . "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Home Pages _068, University of Pennsylvania.
  27. Timothy Conley & Udry Christopher, 2001. "Social Learning Through Networks: The Adoption of New Agricultural Technologies in Ghana," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 668-673.
  28. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
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