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Do remittances help smooth consumption during health shocks? Evidence from Jamaica

  • Diether W. Beuermann

    (Inter-American Development Bank)

  • Inder J. Ruprah

    (Inter-American Development Bank)

  • Ricardo E. Sierra

    (Inter-American Development Bank)

Social networks provide an important means by which individuals and households share risk. One of the mechanisms by which informal risk sharing could be achieved is through remittances. Accordingly, this paper identifies whether and how remittances facilitate consumption smoothing during health shocks in Jamaica. In addition, we identify whether remittances are subject to moral hazard by receivers, how the informal insurance provided by remittances interacts with formal health insurance, and whether there are differential effects by gender of the household head. Overall, we find that remittances offer complete insurance towards decreased consumption during health shocks and that moral hazard is weak. The role of remittances as a social insurance mechanism, however, is only relevant in the absence of private health insurance. Public formal health insurance is found to perform a poor job as a safety net that is completely offset by the social insurance provided by remittances.

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Paper provided by Peruvian Economic Association in its series Working Papers with number 2014-12.

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Date of creation: Apr 2014
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Handle: RePEc:apc:wpaper:2014-012
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  1. Marcel Fafchamps & Susan Lund, . "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
  2. Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
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