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Inequality and Risk

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  • Marcel Fafchamps

Abstract

In poor societies, asset accumulation serves as insurance. It also opens the door to wider inequality. Many societies prohibit certain types of accumulation, such as land sales or indenture contracts. This paper investigates the theoretical relationship between risk sharing, asset accumulation, and long-term inequality. Scenarios with and without growth are contrasted. The paper also examines how asymmetric risk sharing (patronage) interacts with wealth accumulation to generate unequal distribution of assets and consumption while providing insurance to the poor.

Suggested Citation

  • Marcel Fafchamps, 2002. "Inequality and Risk," WIDER Working Paper Series DP2002-07, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2002-07
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    1. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," The World Bank Research Observer, World Bank, vol. 17(2), pages 141-166, September.
    2. Christian Rogg, 2006. "Asset Portfolios in Africa: Evidence from Rural Ethiopia," WIDER Working Paper Series RP2006-145, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    Equality and inequality; Insurance; Poverty; Risk management; Saving and investment;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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