IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Health Shocks and Consumption Smoothing: Evidence from Indonesia

Listed author(s):
  • Maria Eugenia Genoni
Registered author(s):

    Episodes of uninsured illness can seriously compromise a household's well-being. This article provides further evidence on the consequences of illness episodes on earnings and consumption in Indonesia. We exploit a rich panel data set that allows us to combine fixed effects and instrumental variables to address biases associated with the endogeneity of illness. Using deteriorations in physical functioning to measure illness for a sample of prime-age individuals, we find that earnings are significantly reduced. However, the effects on consumption are relatively small and statistically insignificant. In addition, we explore informal mechanisms that households may be using to smooth out the consequences of these episodes. In particular, we study whether households deplete liquid assets or receive transfers from noncoresident kin. Transfers are responsive to illness, but there is no evidence of asset depletions. Overall, our findings suggest some ability to smooth the income effects of illness on average. Nonetheless, our analysis is subject to some important caveats that highlight the difficulties of identifying these effects and the need for more careful research on this relevant question.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://dx.doi.org/10.1086/664019
    Download Restriction: Access to the online full text or PDF requires a subscription.

    File URL: http://dx.doi.org/10.1086/664019
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

    Volume (Year): 60 (2012)
    Issue (Month): 3 ()
    Pages: 475-506

    as
    in new window

    Handle: RePEc:ucp:ecdecc:doi:10.1086/664019
    Contact details of provider: Web page: http://www.journals.uchicago.edu/EDCC/

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Rosenzweig, Mark R, 1988. "Risk, Implicit Contracts and the Family in Rural Areas of Low-income Countries," Economic Journal, Royal Economic Society, vol. 98(393), pages 1148-1170, December.
    2. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    3. Stefan Dercon & Pramila Krishnan, 2000. "In Sickness and in Health: Risk Sharing within Households in Rural Ethiopia," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 688-727, August.
    4. Duncan Thomas & Elizabeth Frankenberg & James P. Smith, 2001. "Lost but Not Forgotten: Attrition and Follow-up in the Indonesia Family Life Survey," Journal of Human Resources, University of Wisconsin Press, vol. 36(3), pages 556-592.
    5. Thomas, Duncan & Strauss, John, 1997. "Health and wages: Evidence on men and women in urban Brazil," Journal of Econometrics, Elsevier, vol. 77(1), pages 159-185, March.
    6. Wagstaff, Adam, 2007. "The economic consequences of health shocks: Evidence from Vietnam," Journal of Health Economics, Elsevier, vol. 26(1), pages 82-100, January.
    7. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 311-335.
    8. Schultz, T. Paul & Tansel, Aysit, 1997. "Wage and labor supply effects of illness in Cote d'Ivoire and Ghana: instrumental variable estimates for days disabled," Journal of Development Economics, Elsevier, vol. 53(2), pages 251-286, August.
    9. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    10. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
    11. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    12. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-114, Summer.
    13. Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-918, October.
    14. Kochar, Anjini, 1995. "Explaining Household Vulnerability to Idiosyncratic Income Shocks," American Economic Review, American Economic Association, vol. 85(2), pages 159-164, May.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ucp:ecdecc:doi:10.1086/664019. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.