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Causal Effects of Health Shocks on Consumption and Debt: Quasi-Experimental Evidence from Bus Accident Injuries

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  • Manoj Mohanan

    (Duke University)

Abstract

Endogeneity between health and wealth presents a challenge for estimating causal effects of health shocks. Using a quasi-experimental design, comprising exogenous shocks sustained as bus accident injuries in India, with controls drawn from travelers on the same bus routes one year later, I present new evidence of causal effects on consumption and debt. Using primary household survey data, I find that households faced with shock-related expenditures are able to smooth consumption on food, housing, and festivals, with small reductions in educational spending. Debt was the principal mitigating mechanism households used, leading to significantly larger levels of indebtedness. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Manoj Mohanan, 2013. "Causal Effects of Health Shocks on Consumption and Debt: Quasi-Experimental Evidence from Bus Accident Injuries," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 673-681, May.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:2:p:673-681
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    Keywords

    health shocks; consumption; debt; bus accidents; injuries; India;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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