Summarizes what is known from theoretical and empirical studies concerning the sources of risk faced by the rural poor, the risk coping strategies they have developed, and how risk affects the rural poor's capacity to develop. Provides a brief overview of the issues surrounding poverty and risk in underdeveloped rural areas. Discusses a variety of strategies the rural poor have developed for coping with risk, including settling in safe areas; breeding plants and species that survive in difficult environments; diversifying sources of income; preserving flexibility and keeping options open; accumulating precautionary savings; forming strong and large households; seeking the protection of the rich and powerful; and sharing risk with a large network of friends and relatives. Analyzes the natural limits to the risk coping strategies of the poor, drawing on the theory of repeated games. Examines how wealth accumulation and risk sharing affect the evolution of inequality over time, presenting results derived from various modeling frameworks. Discusses several mechanisms through which poverty and vulnerability hurt growth. Takes stock of what has been learned about the relationship between risk, rural poverty, and economic development, identifying current gaps in knowledge and areas where empirical work is most needed to support or vindicate recent theoretical development. Presents policy implications for governments and international organizations. Fafchamps is at the Department of Economics and at Mansfield College, University of Oxford. Bibliography; index.