Insuring Consumption against Illness, Gertler, P. and J.
Gruber(2002)
Slide 2
Impacts of adverse health shocks We face a calamity when my
husband gets ill. Our life comes to a halt until he recovers and
goes back to work. Narayan et al.(2000) 26 year-old man in Lao Cai,
Vietman: richest one of poorest in his community (because of his
daughter's severe illness) Abundant anecdotal evidence.
Slide 3
Two main economic costs Medical costs associated with illness
The loss of income associated with reduced labor supply and
productivity
Slide 4
The Effect on Households Consumption If these two costs are
sizable and unpredictable consumption may not be perfectly insured
Imperfect insurance of consumption consumption during periods of
shocks utility (welfare ) The study helps us to understand the
importance of health insurance?
Slide 5
Insurance market Formal: NHI, others (self insurance) Informal
insurance market Savings Others: selling assets, transfers from
their families and social support networks, borrowing from local
credit markets Labor Market Work or not Labor substitution among
family members
Slide 6
Literature - No impact on consumption No impact on minor
illness Townsend, R.(1995) Consumption Insurance: An Evaluation of
Risk-Bearing Systems in Low-Income Economies, Journal of Economic
Perspectives, Vol.9(3), pp83-102 Kochar, A. (1995) Explaning
Household Vulnerability of Idiosyncratic Income Shocks. American
Economic Review, Vol.85(2), pp159-64.
Slide 7
Goal The effect of health shocks on labor supply work or not
labor supply of other family members The effect of health shocks on
earning medical spending earning The effect of health shocks on
earning consumption other family members consumption
Slide 8
Gertler and Gruber(2002) Health shocks labor supply earning
medical spending
Slide 9
Data Indonesian Resource Mobilization Study: panel (1991 and
1993) 3933 households Household Information health consumption
income other family members
Slide 10
Health measure Activities of daily living index (ADL) basic and
intermediate ADL objective measure major illness Illness symptoms
Illness symptoms and chronic illness symptom subjective measure
minor illness
