Risk and Vulnerability in Development Economics

1. IntroductionGrowth and development are often analyzed as if they occur in a world without risk. This must strike any entrepreneur as absurd: whether his enterprise succeeds, indeed whether it survives, depends in no small measure on his ability to recognize and cope with risks. That standard textbooks on growth theory describe his world as a sterile environment without shocks he would find hard to believe.The neglect of risk in many textbooks is particularly serious for Africa where development takes place in a relatively risky environment with poor risk coping mechanisms a dangerous combination which makes risk a central issue.  This note considers how development economists have analyzed three issues related to growth: the effect of risk on growth (section 2), the way governments should respond to trade shocks (section 3), and the introduction of insurance in areas with poorly developed financial markets (section 4). The emphasis is in on how views have changed over the last three decades, on where there has been progress and where the field has not yet reached satisfactory answers.  Section 5 concludes. 

Gunning, J-W. "Risk and Vulnerability in Development Economics" Ferdi, note brève B95, mai 2014