Health shock and indebtedness

Does having access to health insurance reduce the reliance on borrowing as a shock coping strategy?

authored by: Linh D. Nguyen, Thanh T. Nguyen, Thanh T. Nguyen, Ulrike Grote
Abstract: Households in developing countries are often impaired in their economic opportunities by major health shocks. In this article, we first investigate the impact of a health shock on rural household consumption and explore the mechanisms how the health shock brings a household into indebtedness. We then examine the role of health insurance in reducing the reliance on borrowing as a shock coping strategy. Our estimations show that while rural households are able to insure non-health-related consumption, a health shock pushes them into severe indebtedness by increasing informal borrowing to smooth consumption. Promotion of health insurance is recommended as it helps to protect households from falling into severe indebtedness when a health shock strikes.
Organisation(s): Institute of Environmental Economics and World Trade
External Organisation(s): Vietnamese Academy of Science and Technology
University of Bonn
Type: Article
Journal: Applied Economic Perspectives and Policy
ISSN: 2040-5790
Publication date: 02.01.2025
Publication status: E-pub ahead of print
Peer reviewed: Yes
ASJC Scopus subject areas: Development, Economics and Econometrics
Electronic version(s): https://doi.org/10.1002/aepp.13495 (Access: Open)

BibTeX

@article{0bcb2acacff14db49bf57a94c85923c4,
title = "Health shock and indebtedness: Does having access to health insurance reduce the reliance on borrowing as a shock coping strategy?",
abstract = "Households in developing countries are often impaired in their economic opportunities by major health shocks. In this article, we first investigate the impact of a health shock on rural household consumption and explore the mechanisms how the health shock brings a household into indebtedness. We then examine the role of health insurance in reducing the reliance on borrowing as a shock coping strategy. Our estimations show that while rural households are able to insure non-health-related consumption, a health shock pushes them into severe indebtedness by increasing informal borrowing to smooth consumption. Promotion of health insurance is recommended as it helps to protect households from falling into severe indebtedness when a health shock strikes.",
keywords = "consumption smoothing, health insurance, health shock, indebtedness",
author = "Nguyen, {Linh D.} and Nguyen, {Thanh T.} and Nguyen, {Thanh T.} and Ulrike Grote",
note = "Publisher Copyright: {\textcopyright} 2025 The Author(s). Applied Economic Perspectives and Policy published by Wiley Periodicals LLC on behalf of Agricultural & Applied Economics Association.",
year = "2025",
month = jan,
day = "2",
doi = "10.1002/aepp.13495",
language = "English",
journal = "Applied Economic Perspectives and Policy",
issn = "2040-5790",
publisher = "Oxford University Press",
}