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Poor People and Risky Business

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  • Zuleta Hernando

    (Universidad del Rosario)

Abstract

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.

Suggested Citation

  • Zuleta Hernando, 2008. "Poor People and Risky Business," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(1), pages 97-112, April.
    • Handle: RePEc:bpj:pepspp:v:14:y:2008:i:1:n:5
    DOI: 10.2202/1554-8597.1107
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    Cited by:

    1. Gustavo Adolfo Caballero Orozco, 2010. "Risk Preferences Under Extreme Poverty: A Field Experiment," Documentos CEDE 7717, Universidad de los Andes, Facultad de Economía, CEDE.
    2. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]," MPRA Paper 16473, University Library of Munich, Germany.
    3. Zuleta, Hernando & Villaveces, Marta Juanita & Andonova, Veneta, 2013. "Conflict and negotiation in Colombia: Are pre-donations useful?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 105-117.
    4. Lemus Natalia, 2014. "Conflict-Induced Poverty: Evidence from Colombia," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(1), pages 113-142, January.
    5. Andrés Zambrano & Hernando Zuleta, 2016. "Revealing the preferences of the FARC," Documentos CEDE 14572, Universidad de los Andes, Facultad de Economía, CEDE.

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    More about this item

    Keywords

    poverty; income distribution; illegal business;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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