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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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2009-11.

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Date of creation: 01 Jul 2009
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Handle: RePEc:oxf:wpaper:csae-wps/2009-11
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  1. Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
  2. Suresh de Mel & David McKenzie & Christopher Woodruff, 2008. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1329-1372, November.
  3. 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.
  4. Richard Akresh, 2004. "Adjusting Household Structure: School Enrollment Impacts of Child Fostering in Burkina Faso," Working Papers 897, Economic Growth Center, Yale University.
  5. Robert M. Townsend & Shawn Cole & Jeremy Tobacman & Xavier Gine & James Ian Vickery & Petia Topalova, 2012. "Barriers to Household Risk Management: Evidence from India," IMF Working Papers 12/195, International Monetary Fund.
  6. Deaton, A., 1992. "Saving and Income Smoothing in Cote d'Ivoire," Papers 156, Princeton, Woodrow Wilson School - Development Studies.
  7. Ashraf, Nava & Giné, Xavier & Karlan, Dean S., 2009. "Finding Missing Markets (and a disturbing epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya," CEPR Discussion Papers 7133, C.E.P.R. Discussion Papers.
  8. Alderman,Harold & Hoddinott, John & Kinsey, Bill, 2003. "Long-term consequences of early childhood malnutrition," FCND briefs 168, International Food Policy Research Institute (IFPRI).
  9. Oriana Bandiera & Imran Rasul, 2002. "Social networks and technology adoption in Northern Mozambique," LSE Research Online Documents on Economics 3539, London School of Economics and Political Science, LSE Library.
  10. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  11. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 635-672, May.
  12. DREZE, Jacques H. & MODIGLIANI, Franco, . "Cosumption decisions under uncertainty," CORE Discussion Papers RP -119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  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. Marcel Fafchamps & Chris Udry & Katherine Czukas, . "Drought and Saving in West Africa: Are Livestock a Buffer Stock?," Working Papers 97013, Stanford University, Department of Economics.
  15. 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.
  16. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
  17. 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.
  18. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
  19. Miguel, Edward & Roland, Gérard, 2011. "The long-run impact of bombing Vietnam," Journal of Development Economics, Elsevier, vol. 96(1), pages 1-15, September.
  20. 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.
  21. Marcel Fafchamps & Takashi Kurosaki, 2000. "Insurance Market Efficiency and Crop Choices in Pakistan," Economics Series Working Papers 12, University of Oxford, Department of Economics.
  22. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
  23. 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.
  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. 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.
  26. Carter, Michael R. & Zimmerman, Frederick J., 2000. "The dynamic cost and persistence of asset inequality in an agrarian economy," Journal of Development Economics, Elsevier, vol. 63(2), pages 265-302, December.
  27. 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.
  28. Akresh, Richard, 2004. "Adjusting Household Structure: School Enrollment Impacts of Child Fostering in Burkina Faso," IZA Discussion Papers 1379, Institute for the Study of Labor (IZA).
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