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Insuring Consumption Against Illness

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  • Paul Gertler
  • Jonathan Gruber

Abstract

One of the most sizable and least predictable shocks to economic opportunities in developing countries is major illness. We investigate the extent to which families are able to insure consumption against major illness using a unique panel data set from Indonesia that combines excellent measures of health status with consumption information. We find that there are significant economic costs associated with major illness, and that there is very imperfect insurance of consumption over illness episodes. These estimates suggest that public disability insurance or subsidies for medical care may improve welfare by providing consumption insurance. (JEL O0, H1)

Suggested Citation

  • Paul Gertler & Jonathan Gruber, 2002. "Insuring Consumption Against Illness," American Economic Review, American Economic Association, vol. 92(1), pages 51-70, March.
    • Handle: RePEc:aea:aecrev:v:92:y:2002:i:1:p:51-70
    Note: DOI: 10.1257/000282802760015603
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    More about this item

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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