nonlinearities in economic dynamics two reasons that led to the dominance of the linear stochastic difference equations approach the first one was the fact that the nonlinear systems seemed incapable of reproducing the statistical aspects of actual economic time series at best such models were able to produce periodic motion1 and an examination of the spectra of economic time series showed the absence of the spikes that characterise periodic data the emphasis on the equilibrium approach to aggregate economic behaviour cf lucas i 986 would make things even more difficult the plethora of stability results for models of infinitely lived agents with perfect foresight turnpike theorems suggested that even the regular fluctuations that had been derived in the literature on endogenous business cycles were incompatible with a theory that had solid microeconomic foundations further this indicated that while nonlinearities could be present the explanations of the fluctuations had to rest solely on the presence of exogenous shocks that working through the equilibrating mechanism would create the observed randomness if such shocks were absent the system would tend to a stationary state the second reason was the empirical success of the models based on linear stochastic difference equations low order autoregressive processes captured some of the features of aggregate time series in turn these processes can in principle result from an economy with complete markets where production is subject to exogenous shocks though the task of confronting these equilibrium models with actual data has not yielded uncontroversial results see the discussion and references in section i there was no obvious gain in the

intersectoral transfer growth and inequality in rural ecuador abstract in this paper we study intersectoral transfer and its impact on the distribution of income in ecuador we find that income shares between farm and nonfarm activities are roughly equal on average although the rich in rural areas typically receive a greater share of income from nonfarm sources thus decomposing inequality by income source reveals that a rise in nonfarm incomes increases inequality drawing on a new method to estimate local level distributional outcomes growth of the high productivity nonfarm sector is observed to have a strong and positive association with average consumption and inequality growth of the low productivity nonfarm sector is associated with little change in either average income or income inequality irrespective of subsector growth of the nonfarm sector is associated with a substantial fall in poverty

sectoral shocks and aggregate fluctuations abstract this paper presents a multisector dynamic general equilibrium model of business cycles with a distinctive feature aggregate fluctuations are driven by independent sectoral shocks the model hypothesizes that trade among sectors provides a strong synchronization mechanism for these shocks due to the limited but locally intense interaction that is characteristic of such input trade flows limited interaction characterized by a sparse intermediate input use matrix reduces substitution possibilities among intermediate inputs which strengthens comovement in sectoral value added and leads to a postponement of the law of large numbers in the variance of aggregate value added the chief virtue of this model is that reliance on implausible aggregate shocks is not necessary to capture the qualitative features of macroeconomic fluctuations building on horvath 1998 review of economic dynamics 1 781 808 which establishes the theoretical foundation for the relevance of limited interaction in the context of a stylized multisector model this paper specifies a more general multisector model calibrated to the us 2 digit standard industrial code economy simulations prove the model is able to match empirical reality as closely as standard one sector business cycle models without relying on aggregate shocks

the economy wide impacts and risks of malawi s farm input subsidy program we estimate the impact of malawi farm input subsidy programme using an economywide approach we find potentially substantial net benefits with indirect benefits accounting for about two fifths of total benefits due to these indirect benefits the cut off

nonfarm diversification poverty economic mobility and income inequality a case study in village india this paper assembles data at the all india level and for the village of palanpur uttar pradesh to document the growing importance and influence of the non farm sector in the rural economy between the early 1980s and late 2000s the suggestion from the combined national sample survey and palanpur data is of a slow process of non farm diversification whose distributional incidence on the margin is increasingly pro poor the village level analysis documents that the non farm sector is not only increasing incomes and reducing poverty but appears as well to be breaking down long standing barriers to mobility among the poorest segments of rural society efforts by the government of india to accelerate the process of diversification could thus yield significant returns in terms of declining poverty and increased income mobility the evidence from palanpur also shows however that at the village level a significant increase in income inequality has accompanied diversification away from the farm a growing literature argues that such a rise in inequality could affect the fabric of village society the way in which village institutions function and evolve and the scope for collective action at the village level failure to keep such inequalities in check could thus undermine the pro poor impacts from the process of structural transformation currently underway in rural india

revisiting between group inequality measurement an application to the dynamics of caste inequality in two indian villages standard approaches to decomposing how much group differences contribute to inequality rarely show significant between group inequality and are of limited use in comparing populations with different numbers of groups this study applies an adaptation to the standard approach that remedies these problems to longitudinal household data from two indian villages palanpur in the north and sugao in the west the authors find that in palanpur the largest scheduled caste group failed to share in the gradual rise in village prosperity this would not have emerged from standard decomposition analysis however in sugao the alternative procedure did not yield any additional insights because income gains applied relatively evenly across castes

macroeconomics after the crisis time to deal with the pretense of knowledge syndrome the recent financial crisis has damaged the reputation of macroeconomics largely for its inability to predict the impending financial and economic crisis to be honest this inability to predict does not concern me much it is almost tautological that severe crises are essentially unpredictable for otherwise they would not cause such a high degree of distress what does concern me about my discipline is that its current core by which i mainly mean the so called dynamic stochastic general equilibrium approach has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with the precision that it has about the real one this is dangerous for both methodological and policy reasons to be fair to our field an enormous amount of work at the intersection of macroeconomics and corporate finance has been chasing many of the issues that played a central role during the current crisis including liquidity evaporation collateral shortages bubbles crises panics fire sales risk shifting contagion and the like however much of this literature belongs to the periphery of macroeconomics rather than to its core i will discuss the distinction between the core and the periphery of macroeconomics as well as the futile nature of the integrationist movement that is the process of gradually bringing the insights of the periphery into the dynamic stochastic general equilibrium structure i argue that the complexity of macroeconomic interactions limits the knowledge we can ever attain and that we need to place this fact at the center of our analysis we should consider what this complexity does to the actions and reactions of the economic agent and seek analytical tools and macroeconomic policies that are robust to the enormous uncertainty to which we are confined

poverty decline agricultural wages and non farm employment in rural india 1983 2004 the authors analyze five rounds of national sample survey data covering 1983 1987 8 1993 4 1999 0 and 2004 5 to explore the relationship between rural diversification and poverty poverty in rural india declined at a modest rate during this period the authors provide region level estimates that illustrate considerable geographic heterogeneity in this progress poverty estimates correlate well with region level data on changes in agricultural wage rates agricultural labor remains the preserve of the uneducated and also to a large extent of the scheduled castes and scheduled tribes although agricultural labor grew as a share of total economic activity over the first four rounds it had fallen back to the levels observed at the beginning of the survey period by 2004 this all india trajectory masks widely varying trends across states during this period the rural non farm sector grew modestly mainly between the last two survey rounds regular non farm employment remains largely associated with education levels and social status that are rare among the poor however casual labor and self employment in the non farm sector reveal greater involvement by disadvantaged groups in 2004 than in the preceding rounds the implication for poverty is not immediately clear the poor may be pushed into low return casual non farm activities due to lack of opportunities in the agricultural sector rather than being pulled by high returns offered by the non farm sector econometric estimates reveal that expansion of the non farm sector is associated with falling poverty via two routes a direct impact on poverty that is likely due to a pro poor marginal incidence of non farm employment expansion and an indirect impact attributable to the positive effect of non farm employment growth on agricultural wages the analysis also confirms the important contribution to rural poverty reduction from agricultural productivity availability of land and consumption levels in proximate urban areas

perspective from gaussian to paretian thinking causes and implications of power laws in organizations although normal distributions and related current quantitative methods are still relevant for some organizational research the growing ubiquity of power laws signifies that pareto rank frequency distributions fractals and underlying scale free theories are increasingly pervasive and valid characterizations of organizational dynamics when they apply researchers ignoring power law effects risk drawing false conclusions and promulgating useless advice to practitioners this is because what is important to most managers are the extremes they face not the averages we show that power laws are pervasive in the organizational world and present 15 scale free theories that apply to organizations next we discuss research implications embedded in pareto rank frequency distributions and draw statistical and methodological implications

a search theoretic approach to monetary economics the essential function of money is its role as a medium of exchange the authors formalize this idea using a search theoretic equilibrium model of the exchange process that captures the double coincidence of wants problem with pure barter one advantage of the framework described here is that it is very tractable the authors also show that the model can be used to addre ss some substantive issues in monetary economics including the potenti al welfare enhancing role of money the interaction between specializat ion and monetary exchange and the possibility of equilibria with multip le fiat currencies copyright 1993 by american economic association

a comment on efficient propagation of shocks and the optimal return on money lotteries are introduced into cavalcanti and erosa 2008 2 a version of trejos and wright 1995 4 with aggregate shocks lotteries improve welfare and eliminate the two notable features of the optimum with deterministic trades over production and history dependence moreover the optimum can be supported by buyer take it or leave it offers

poverty in palanpur the meaning and identification of poverty are examined using three indicators of standard of living in the north indian village of palanpur the first is intended as a measure of apparent prosperity based on the personal assessments of investigators after intensive field work in the village over the full agricultural year 1983 84 the other two are income in 1983 84 and a measure of permanent income obtained by averaging incomes from four surveys conducted over a twenty six year interval a comparison of these three indicators shows that income measured in any one year may give a misleading impression of the incidence of poverty the risk of poverty for households is calculated vulnerability is high among low caste households and those which are involved in agricultural labor categories however are not homogeneous for example whereas the landless and widows are more likely to be poor some of such households are quite well off it is argued that poverty in a good agricultural year is a better indicator of sustained poverty than poverty in a bad year occupational mobility out of agricultural labor is low and changes in the distribution of land are largely accounted for by demographic processes such as household splits

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

sectoral productivity growth and poverty reduction national and global impacts summary this paper examines the implications of productivity improvements in agriculture industry and services for global poverty we find that in poor countries increases in agricultural productivity generally have a larger poverty reduction effect than increases in industry or services this differential declines as average incomes rise partly because agriculture becomes smaller as a share of the economy and partly because agricultural productivity growth becomes less effective in reducing poverty the source of the poverty reduction benefits from agricultural productivity growth changes as innovations are more widely adopted moving from increases in producer returns to reductions in consumer prices

self organized criticality and economic fluctuations economists have long been interested in explaining the observed instability of economic aggregates though several reasons for variation in the pace of production are easily given such as exogenous variation in tastes or in production possibilities it is hard to see why there should be large variations in those factors that are synchronized across the entire economy instead it seems more likely to suppose that variations in demand or in production costs in different parts of the economy should be largely independent and hence that a law of large numbers would imply that significant variations in aggregate activity relative to the typical size of aggregate activity are not likely to occur an alternative approach proposes that economies possess intrinsically unstable dynamics which even in the absence of external shocks would result in persistent deterministic fluctuations this type of model implies however that aggregate fluctuations should involve motion on a low dimensional attractor while analysis of economic time series has not revealed structure of this kind another alternative proposes that the economy possesses multiple equilibria and that it can therefore switch between equilibria for arbitrary reasons this possibility suffers however from the difficulty that one must explain how people succeed in coordinating their expectations about the times at which a shift should occur here we explore another type of explanation which relies on an entirely different mechanism our proposal is that the effects of many small independent shocks to different sectors of the economy need not cancel out in the aggregate due to the presence of significantly nonlinear strongly localized interactions between different parts of the economy the type of macroscopic instability that can result has been studied by condensed matter physicists under the name of self organized criticality per bak and kan chen 1991 physicists have noted in several contexts the possibility of a critical state in which independent microscopic fluctuations can propagate so as to give rise to instability on a macroscopic scale this is a state in which chain reactions initiated by local disturbances neither damp out over a short distance the subcritical case nor propagate explosively so that the system cannot remain in that state the supercritical case as in the controlled nuclear fission that allows a reactor to generate power without exploding often this has seemed to depend upon parameters being carefully tuned to exactly their critical values in the case of a reactor an elaborate control mechanism is required to keep it near criticality more recently it has been argued that some systems may spontaneously evolve toward a critical state and return to it even if perturbed by an external shock the prototypical example of such selforganized criticality is a sandpile when the slope of the pile is nowhere too steep dropping on additional grains of sand at randomly chosen sites has no macroscopic effects as at most small numbers of grains will shift position in each case however randomly dropping on additional sand will eventually result in the slope of the pile increasing to a critical slope at which point large avalanches can occur in response to the dropping of a single additional grain of sand a sandpile with a slope that is initially greater than the critical slope also evolves toward it in this case through an immediate department of economics university of chicago 1126 east 59th st chicago il 60637 we thank per bak buz brock boyan jovanovic and paul krugman for discussions and the santa fe institute and the nsf for research support 1scheinkman 1990 surveys empirical work on this

the free trade epidemic of the 1860s and other outbreaks of economic discrimination why was there an abrupt increase in economic openness in europe in the 1860s this increase may have been the result of a contagion process in which the cobden chevalier treaty between britain and france threatened to displace third party exports to fra nce with british exports as a result most european states signed similar treaties with france which had further ripple effects this article outlines a formal model of this process based on the assumption that an agreement between two states incre ases the desirability of similar treaties to third parties propositions regarding the rate and pattern of spread of treaties are derived from this model this article then discusses the insights these propositions may offer into the rise and fall of the most favored nation network of treaties between 1860 and 1929 at a theoretical level the model aims to link the microlevel processes underlying state preferences to system level phenomena at a substantive level this analysis offers insight into the current explosion of regionalism

stochastic cascades credit contagion and large portfolio losses abstract we analyze an interactive model of credit ratings where external shocks spread by a contagious chain reaction to the entire economy counterparty relationships along with discrete adjustments of credit ratings generate a transition mechanism that allows the financial distress of one firm to spill over to its business partners the spread of financial distress constitutes a source of intrinsic risk for large portfolios of credit sensitive securities that cannot be diversified away we provide a characterization of the fluctuations of credit ratings in large economies when adjustments follow a threshold rule and analyze the effects of downgrading cascades on credit portfolios

beyond gaussian averages redirecting international business and management research toward extreme events and power laws practicing managers live in a world of extremes but international business and management research is based on gaussian statistics that rule out such extremes on occasion positive feedback processes among interactive data points cause extreme events characterized by power laws they seem ubiquitous we list 80 kinds of them half each among natural and social phenomena we use imposed tension and per bak s self organized criticality to argue that pareto based science and statistics based on interdependence positive feedback scalability nearly infinite variance and emphasizing extremes should parallel the traditional dominance of gaussian statistics based on independent data points finite variance and emphasizing averages we question quantitative journal publications depending on gaussian statistics the cost is inaccurate science and irrelevance to practitioners in conclusion no statistical findings should be accepted into business studies if they gain significance via some assumption device by which extreme events and nearly infinite variance are ignored accordingly we suggest redirecting international business studies and management research in general

are output growth rate distributions fat tailed some evidence from oecd countries this work explores some distributional properties of aggregate output growth rate time series we show that in the majority of oecd countries output growth rate distributions are well approximated by symmetric exponential power densities with tails much fatter than those of a gaussian fat tails robustly emerge in output growth rates independently of i the way we measure aggregate output ii the family of densities employed in the estimation iii the length of time lags used to compute growth rates we also show that fat tails still characterize output growth rate distributions even after one washes away outliers autocorrelation and heteroscedasticity

aggregation and irrelevance in multi sector models abstract this paper studies the ability of input output relationships to generate fluctuations in aggregate output in several multi sector models including that of long and plosser 1983 in these models the manufacture of each sector s output depends on other sectors for materials these interconnections provide a mechanism for transmission of shocks across sectors and over time we ask how aggregates from these multi sector models behave relative to single sector models we provide conditions under which the second moment properties of aggregates in these models are the same as their single sector counterparts we further demonstrate that a broad class of input output structures generate aggregates with identical second moment properties and that the input output structures in this class provide a poor amplification mechanism for sector shocks

efficient propagation of shocks and the optimal return on money abstract we study optimal allocations in an environment in which money is essential due to lack of commitment and anonymity of individuals because the economy features aggregate preference shocks we apply a notion of implementability that allows for allocations with non trivial business cycle dynamics for the propagation of shocks we show that history dependence is predicted by the theory of second best and becomes necessary for optimality when the degree of patience is neither too low nor too high our analysis concludes with a discussion of whether there is a role for the propagation of shocks in alternative economic environments

estimating the relative benefits of agricultural growth on the distribution of expenditures does the sectoral composition of aggregate economic growth affect poverty we ask whether agricultural growth in developing countries increases the expenditures of poorer households more than growth in other sectors while some reduced form analyses have tackled this question using either country level time series data regional panel data for one country or cross sectional country data this paper is unusual in using panel data for many countries we improve on much of the existing literature by devising an instrumental variables strategy to correct for the endogeneity of sectoral gdp growth involving averaging over sectoral income growth rates for neighboring countries our principal finding from our instrumental variable estimator is that the estimated elasticities associated with growth in agricultural income are significantly greater than for non agricultural income for all but the extreme top and bottom deciles in the middle range of the income distribution the effect of a given gdp growth due to agriculture is 3 4 times larger than if it was due to non agricultural activities having established that on average growth in gdp originating in agriculture is more beneficial for poorer deciles we finally explore whether this is a pattern which holds across different groupings of countries a second important finding is that there is heterogeneity across some groupings most particularly we find that it is the poorest people in the poorest countries for whom agricultural income growth is the most beneficial

valuation equilibria with transactions costs transactions costs are a potentially important friction in macroeconomics yet the task of assessing the effects of measured transactions costs on aggregate equilibrium has proceeded very slowly for instance in the field of asset pricing the effects of observed transactions costs on security prices and other aspects of financial equilibrium remain more or less unmeasured in the area of growth accounting the effect of increased value added in the financial services sector on the efficiency of resource allocation and hence total factor productivity remains largely unmeasured as well in our view these tasks have been hindered by a perception that standard general equilibrium theory is not applicable to problems in which the re allocation of resources among users is costly for instance walter heller and ross starr s 1976 formulation of the equilibrium problem for transactions costs economies does not make the connection with standard general equilibrium theory in contrast the objective of this paper is to show that for a class of economic environments with transactions costs a simple reformulation of the commodity space allows these transactions costs economies to be studied as particular instances of gerard debreu s 1954 valuation equilibrium making the connection with established general equilibrium theory as in debreu 1954 is a useful step in the study of transactions costs and should facilitate the types of measurement tasks noted above in particular the close connection between pareto optimality and valuation equilibrium i e the first and second welfare theorems should provide a solid foundation for the quantitative study of resource allocation in the presence of transactions costs the fact that the gains from trade have been exhausted means that valuation equilibria with transactions costs cannot be improved upon i e allocations that make all consumers better off do not exist this should permit researchers to sidestep issues about institutional design which tend to make analyses of transactions costs difficult

a contribution to the pure theory of money abstract this article analyzes a general equilibrium model with search frictions and differentiated commodities because of the many differentiated commodities barter is difficult in that it requires a double coincidence of wants and this provides a medium of exchange role for fiat currency we prove the existence of equilibrium with valued fiat money and show it is robust to certain changes in the environment rate of return dominance liquidity and the welfare implications of fiat money are discussed

agricultural productivity growth rural economic diversity and economic reforms india 1970 2000 a salient theme in d gale johnson s work is the importance of agricultural development for general prosperity and for economic diversification e g johnson 2000 johnson has also noted that most of the world s poor are engaged in farming so that a key focus of development policy is to raise the incomes of farmers from a global perspective increasing the productivity of agriculture given the fixity of land is necessary for both poverty reduction and the development of the nonagricultural sector at the level of the world agricultural productivity gains poverty reduction and the growth of the nonfarm sector are complements however the question remains whether these observations imply that every poor country should focus its public resources on agricultural development in order to raise the incomes of people now engaged in farming and whether such a policy is necessary for obtaining economic diversity in this article we use the experience of india over the past 30 years to address the issue of whether agricultural technical change actually leads to economic diversification and income growth within the rural sector in the context of an open economy country in which there are cross area trade and capital flows we focus in particular on the rural sector because this is the sector in which linkages between agricultural and nonagricultural sectors are thought to be the strongest we exploit the fact that india has maintained a policy of openness with respect to agricultural technology over this period permitting and actively supporting agricultural development and has moved to a reformed regime in which goods are traded and capital is more mobile in the 1990s evidence on the relationship between agricultural growth and nonfarm

self organized criticality in a dynamic game we investigate conditions under which self organized criticality soc arises in a version of a dynamic entry game in the simplest version of the game there is a single location a pool and one agent is exogenously dropped into the pool every period payoffs to entrants are positive as long as the number of agents in the pool is below a critical level if an agent chooses to exit he cannot re enter resulting in a future payoff of zero agents in the pool decide simultaneously each period whether to stay in or not we characterize the symmetric mixed strategy equilibrium of the resulting dynamic game we then introduce local interactions between agents that occupy neighboring pools and demonstrate that under our payoff structure local interaction effects are necessary and sufficient for soc and for an associated power law to emerge thus we provide an explicit game theoretic model of the mechanism through which soc can arise in a social context with forward looking agents

scaling the volatility of gdp growth rates abstract the distribution of shocks to gdp growth rates is found to be exponential rather than normal their standard deviation scales with gdp where 0 15 0 03 these macroeconomic results place restrictions on the microeconomic structure of interactions between agents

jobs off the farm wealth human capital and social group in rural eastern india abstractthis study examines the effects of wealth human capital and social group on the occupational choice and income of farm households to gain an understanding of the mechanism underlying the

characterizing social networks and their effects on income diversification in rural kerala india summary income diversification continues to be a key strategy for poor rural households including those that are progressively developing and those operating under increasing distress the ability of a household to diversify has been shown to depend upon its demographic and economic characteristics and its physical and social context this paper considers the effects of intra village social networks on household income diversification in one of the poorest and most ethnically diverse areas of the indian state of kerala using techniques adapted from spatial econometrics we find that social connections within a village magnify the impacts of household characteristics such as education and number of adults by a factor of 3 6 times models with alternative measures of network centrality degree and eigenvector indicate that the number of network connections that a household has is more important than the centrality of those connections finally we use social contact information to calculate assortative mixing based on caste the results suggest social stratification in these villages with higher levels of stratification associated with lower levels of income diversification

cascading failures in production networks i show how the extensive margin of firm entry and exit can greatly amplify idiosyncratic shocks in an economy with a production network i show that canonical input output models which lack the extensive margin of firm entry and exit have some crucial limitations in these models the systemic importance of a firm does not respond to productivity shocks depends only on the firm s role as a supplier and is equal to or well approximated by the firm s size this means that for every canonical input output model there exists a non interconnected model that has the same aggregate response to productivity shocks i show that when we allow for entry and exit the systemic importance of a firm responds endogenously to productivity shocks depends on a firm s role not just as a supplier but also as a consumer and a firm s systemic influence is no longer well approximated by its size furthermore i show that nondivisibilities in systemically important industries can cause one failure to snowball into a large scale avalanche of failures in this sense shocks can be amplified as they travel through the network whereas in canonical input output models they cannot

a matching model with bounded holdings of indivisible money recent versions of pairwise random matching models of money with divisible and perishable goods are amended to allow individuals to hold more than one unit of an indivisible asset the asset resembles a fiat asset except that nominal holdings of it yield a small amount of utility there is a general upper bound on the number of units of the asset that individuals can hold a steady state with trade is shown to exist the model is applied to study numerically the effect on welfare of the degree to which the asset is divisible

a look into the nature of complex systems and beyond stonehenge economics coping with complexity or ignoring it in applied economics real world economic systems are complex in general but can be approximated by the open systems approach economic systems are very likely to possess the basic and advanced emergent properties e g self organized criticality fractals attractors of general complex systems t he theory of self organized criticality is proposed as a major source of dynamic equilibria and complexity in economic systems this is exemplified in an analysis for self organized criticality of danish agricultural subsectors indicated by power law distributions of the monetary production value for the time period from 1963 to 1999 major conclusions from the empirical part are 1 the sectors under investigation are obviously self organizing and thus very likely to show a range of complex properties 2 the characteristics of the power law distributions that were measured might contain further information about the state or graduation of self organization in the sector varying empirical results for different agricultural sectors turned out to be consistent with the theory of self organized criticality 3 fully self organizing sectors might be economically the most efficient finally empirical implications of the results are discussed complexity theory should be considered as a valuable supplement to the existing analytical toolbox jel classification b52

are rainfed agricultural households insured evidence from five villages in vidarbha india there are several studies on risk and insurance in village economies in the developing world however there is a lack of evidence for recent decades in spite of profound changes including structural transformation and widespread market liberalization in most regions in this paper i use primary panel data from five rainfed villages in a high risk region of india and find evidence of considerable exposure as well as vulnerability to idiosyncratic and covariate risks further there is significant wealth differentiated heterogeneity in vulnerability the findings help identify the scope of public policy in improving risk management in rainfed agriculture

indivisibilities lotteries and monetary exchange we introduce lotteries randomized trading into search theoretic models of money in a model with indivisible goods and fiat money we show goods trade with probability 1 and money trades with probability where 1 iff buyers have sufficient bargaining power with divisible goods a nonrandom quantity q trades with probability 1 and again money trades with probability where 1 iff buyers have sufficient bargaining power moreover q never exceeds the efficient quantity not true without lotteries we consider several extensions designed to get commodities as well as money to trade with probability less than 1 and to illuminate the efficiency role of lotteries