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Risk, Shocks and Development

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  • Jan Willem Gunning

Abstract

In many developing economies, notably in Africa, both governments and private agents live in a high risk environment but have only poor risk coping mechanisms at their disposal. Nevertheless development is typically analyzed as if it occurs in a world without risk. This may be because the effect of risk and shocks on growth is poorly understood. The ex post effects are often implicitly assumed to cancel out in expectation while in the analysis of the ex ante effects it is often assumed that agents have access to perfect assets. This paper argues that the peripheral position of risk in the development literature is a dangerous mistake: risk and shocks should be a central concern for development economists. JEL Classification: D91, C51, O12, O11.

Suggested Citation

  • Jan Willem Gunning, 2014. "Risk, Shocks and Development," Revue d’économie du développement, De Boeck Université, vol. 22(HS01), pages 35-49.
    • Handle: RePEc:cai:edddbu:edd_hs01_0035
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    More about this item

    Keywords

    risk and growth; insurance; precautionary savings; trade shocks;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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