Incomplete consumption insurance against health shocks: Costs and welfare implications

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dc.description.abstract Given that financial protection in health is one of the objectives of the recent health system reforms in many developing countries, understanding clearly the mechanisms that lie behind the financial vulnerability associated with health shocks is key for the success of past and forthcoming reforms. Using Mexican longitudinal data, I study the effect of breadwinners’ health shocks on household consumption, measuring health shocks through changes in the capacity to perform Activities of Daily Living. I find that health shocks to households’ breadwinners are associated with significant long-lasting decreases in non-medical per capita consumption, but health shocks to other household members have no such effects. When consumption depends on labor income, the economic cost associated with a health shock may lie less with direct out-of-pocket medical expenditures than with the diminished capacity to work. Therefore, providing health insurance to the previously uninsured sector of the population could potentially increase social welfare because of its consumption smoothing properties, although it would not necessarily provide full consumption insurance against health shocks. Finally, I use a standardized expected utility model, to compute the risk premia Mexican households would be willing to pay to reduce, either partially or entirely, households’ risk exposure to health shocks. en
dc.title Incomplete consumption insurance against health shocks: Costs and welfare implications en
dc.contributor.author León Lince, Ana Sofía
dc.date.accessioned 2014-11-04T17:11:53Z
dc.date.available 2014-11-04T17:11:53Z
dc.date.issued 2014-11-04
dc.identifier.uri http://hdl.handle.net/123456789/48657
lacea.language.supported en
dc.description Working paper
dc.language.iso en
dc.subject Labor income
dc.subject Mexico
dc.subject Social protection
dc.type Article

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