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Health Shocks And Consumption Smoothing In Rural Households: Does Microcredit Have A Role To Play?

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  • Asadul Islam
  • Pushkar Maitra

Abstract

This paper estimates, using a large panel data set from rural Bangladesh, the effects of health shocks on household consumption and how access to microcredit affects households' response to such shocks. Our results suggest that even though in general consumption remains stable in many cases when households are exposed to health shocks, households that have access to microcredit appear to cope (slightly) better. The most important instrument used by households appear be sales of productive assets (livestock) and there is a significant mitigating effect of microcredit: households that have access to microcredit do not need to sell livestock to the extent households that do not have access to microcredit need to, in order to insure consumption against health shocks. The results suggest that microcredit organizations and microcredit per se have an insurance role to play, an aspect that has not been analyzed previously.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 22/08.

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Length: 35 pages
Date of creation: 01 Aug 2008
Date of revision:
Handle: RePEc:mos:moswps:2008-22

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Keywords: Health Shocks; Microcredit; Consumption Insurance; Bangladesh.;

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Citations

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Cited by:
  1. Ambrosius, Christian & Cuecuecha, Alfredo, 2013. "Are Remittances a Substitute for Credit? Carrying the Financial Burden of Health Shocks in National and Transnational Households," World Development, Elsevier, vol. 46(C), pages 143-152.
  2. You, Jing, 2013. "The role of microcredit in older children’s nutrition: Quasi-experimental evidence from rural China," Food Policy, Elsevier, Elsevier, vol. 43(C), pages 167-179.
  3. S. R. Osmani & Meherun Ahmed, 2013. "Vulnerability to Shocks and Coping Strategies in Rural Bangladesh," Working Papers, Institute of Microfinance (InM) 21, Institute of Microfinance (InM).
  4. Khan, F.U. & Arjun S. Bedi & Sparrow, R.A., 2014. "Sickness and death: economic consequences and coping strategies of the urban poor in Bangladesh," ISS Working Papers - General Series, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague 587, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  5. Gabriela Flores & Owen O'Donnell, 2013. "Catastrophic Medical Expenditure Risk," CESifo Working Paper Series 4198, CESifo Group Munich.
  6. Jing You & Samuel Annim, 2013. "The impact of microcredit on child education: quasi-experimental evidence from rural China," Brooks World Poverty Institute Working Paper Series 18313, BWPI, The University of Manchester.
  7. Gabriela Flores & Owen O'Donnell, 2012. "Catastrophic Medical Expenditure Risk," Tinbergen Institute Discussion Papers 12-078/3, Tinbergen Institute.
  8. Robert Sparrow & Ellen Van de Poel & Gracia Hadiwidjaja & Athia Yumna & Nila Warda & Asep Suryahadi, 2012. "Financial Consequences of Ill Health and Informal Coping Mechanisms in Indonesia," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2012-07, The Australian National University, Arndt-Corden Department of Economics.
  9. Dhanaraj, Sowmya, 2014. "Health shocks and coping strategies: State health insurance scheme of Andhra Pradesh, India," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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