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Health shocks and consumption smoothing in rural households: Does microcredit have a role to play?

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  • Islam, Asadul
  • Maitra, Pushkar

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. Households appear to be fairly well insured against health shocks. Our results suggest that households sell livestock in response to health shocks and short term insurance is therefore attained at a significant long term cost. However microcredit has a significant mitigating effect. Households that have access to microcredit do not need to sell livestock in order to insure consumption. Microcredit organizations and microcredit therefore have an insurance role to play, an aspect that has not been analyzed previously.

Suggested Citation

  • Islam, Asadul & Maitra, Pushkar, 2012. "Health shocks and consumption smoothing in rural households: Does microcredit have a role to play?," Journal of Development Economics, Elsevier, vol. 97(2), pages 232-243.
    • Handle: RePEc:eee:deveco:v:97:y:2012:i:2:p:232-243
    DOI: 10.1016/j.jdeveco.2011.05.003
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    Keywords

    Health shocks; Microcredit; Consumption; Insurance; Bangladesh;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • I10 - Health, Education, and Welfare - - Health - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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