COVERSHEET RISK ATTITUDES IN THE ‘VICIOUS CIRCLE OF POVERTY ’ *

collected the experimental data for Uganda). 2 This paper examines attitudes to risk and the ability to manage risk as two separate stages in the vicious circle of poverty – a process that both causes and is caused by chronic poverty. We have investigated attitudes to risk employing an incentive-compatible research design among small-scale farmers in Ethiopia, Uganda and Andhra Pradesh (India). The evidence presented in this paper suggests that the vicious circle of poverty should be represented as follows. Due to the precarious conditions in which asset-poor small-scale farmers operate in poor countries, and in the absence of insurance markets, adequate risk management requires diverse livelihoods with low covariate risk between the factors that cause the uncertainty of income streams associated with each activity. Failing risk management strategies are bound to lead to a depletion of the (small) physical, human and social capital buffer, thereby increase the likelihood of income povert