Poor people and risky business

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...

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Detalles Bibliográficos
Autor Principal: Zuleta, Hernando
Formato: Documento de trabajo (Working Paper)
Lenguaje:Español (Spanish)
Publicado: Universidad del Rosario 2006
Materias:
Acceso en línea:http://repository.urosario.edu.co/handle/10336/10826
Descripción
Sumario: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.