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Vulnerability, Risk Management, and Agricultural Development


  • Marcel Fafchamps


Vulnerability to risk is a dominant feature of the poor's livelihood. This is particularly true for small farmers in developing countries. Shocks affects welfare through the shocks it induces on income, assets, and health. For many poor farmers in developing countries, risk remains a serious cause of poverty and ruin — and in still too many instances a matter of life and death. Households' desire to protect themselves against shocks is thought to affect their production and savings decisions. This applies in particular to the adoption of agricultural technology. Choosing among crops and techniques of production is like choosing between lotteries, each with its own distribution of anticipated earnings. Farmers who are fearful of future loss of earnings may be reluctant to adopt technological innovations with a variable or unknown return. This observation forms the basis of much thinking about technology adoption by small farmers in developing countries. Reluctance to adopt new agricultural technology for fear of risk is often seen as a key contributor to the persistence of rural poverty: poor people fear the risk associated with innovation, and this keeps them poor. While the argument is intellectually convincing, what remains unclear is how relevant it is in practice. The purpose of this paper is to revisit the literature on the risk management and technology adoption practices of rural households in the developing world. The interaction between risk and poverty has received much attention in the development literature over the last three decades. I have summarized much of it in my 2003 book entitled Risk, Poverty, and Rural Development. Here I focus on a number of issues that do not receive much coverage in the book but have emerged as active research areas in recent years. I start by taking stock of what we know and do not know regarding the behavior of farmers with respect to shocks. I then examine what we know about how risk affects behavior, with a particular emphasis on the behavior of farmers in developing countries. I then turn to the recent literature on technology adoption, with a special focus on findings from field experiments.

Suggested Citation

  • Marcel Fafchamps, 2009. "Vulnerability, Risk Management, and Agricultural Development," CSAE Working Paper Series 2009-11, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2009-11

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    References listed on IDEAS

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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. Belhaj, Mohamed & Deroïan, Frédéric, 2012. "Risk taking under heterogenous revenue sharing," Journal of Development Economics, Elsevier, vol. 98(2), pages 192-202.
    3. 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.
    4. 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.
    5. repec:bla:afrdev:v:29:y:2017:i:2:p:169-183 is not listed on IDEAS
    6. repec:eee:wdevel:v:98:y:2017:i:c:p:447-466 is not listed on IDEAS
    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. 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.
    9. 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.
    10. 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.

    More about this item

    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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