Poor People and Risky Business
Hernando Zuleta ()
Peace Economics, Peace Science, and Public Policy, 2008, vol. 14, issue 1, 1-18
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.
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Working Paper: Poor people and risky business (2006)
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