Poor people and risky business

Hernando Zuleta

No 3356, Documentos de Trabajo from Universidad del Rosario

Abstract: We try to 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.

Keywords: Poverty; Income Distribution; Illegal Business (search for similar items in EconPapers)
JEL-codes: D30 D74 (search for similar items in EconPapers)
Pages: 12
Date: 2006-10-01
New Economics Papers: this item is included in nep-upt
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Journal Article: Poor People and Risky Business (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:003356

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