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Fate and Fear: Risk, Uncertainty, and Poverty (Stefan Dercon)

  Seminar at FASID-GRIPS: Fate and Fear: Risk, Uncertainty, and Poverty by Stefan Dercon (Oxford University).  The lecture contents are slightly different from the paper distributed beforehand.  It is always a benefit of attending a seminar to understand the nuance of the issue at hand.  So, I enjoyed a lot the seminar, and I believe I understand the poverty and vulnerability better, in relative terms.  According to the lecturer, vulnerability is considered as the threat of poverty.  Faced with the threat of poverty in the future, people in poor settings have adopted coping strategies and modified ex-ante their behavior, which could be inefficient but safe.
  A few private comments of mine are in order.  First, I would like to know macro impact of poverty-with-insurance world.  If poverty decreases by 33%, it should have clear impact on macro.  Certainly, it is back-of-the-envelope calculation, but I'd like to know it anyway.  Second, this back-of-the-envelope calculation does not treat well with ex-ante behavioral change.  In risk-free world, clearly farmers would have acted differently.  Third, the loss of mother is not transient shock but constant shock.  So, the shock of drought and the shock of mother loss are different kinds of shocks.  Ever since you lose your mother, you'll miss the mother constantly.  The shock will be with you forever.  Fourth, one might feel the fate and fear by TV game.  This is just a pedagogical idea.  Fifth, WFP-AXA rainfall insurance connection in Ethiopia is very interesting.  Sixth, the experiment of rainfall lottery of Gine et al. (2007), randomisers, is interesting.  We should learn more about lottery in the world.  Lottery should be a better sales talk.  Seventh, the phrase "We have no evidence on how perceptions of risks in Africa related to 'true' risks." is very interesting, indeed.  Eights, he insists poverty line argument is important in the sense that poverty line is social construct.  I totally agree.  Ninth, funeral society in Ethiopia is the only functioning insurance society in Ethiopia.  So, what about their vision about death?  This is where behavioral economics can contribute.  Tenth, his explanation about evaluation of microcredit is very funny.  The externality of micro credit is such that the difference of difference is very small.  I wonder if it is true.

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