Health Shocks and Permanent Income Loss: the Household Business Channel
This study uses an original Vietnamese panel data to provide strong evidence that microenterprises are vulnerable to health shocks affecting their operators and/or other household members. Although intra-household labour reallocation mitigates the direct labour supply decrease, large out-of- pocket health expenditures have the potential of crowding out business-related expenditure, and to significantly decrease investment. The costs associated with illness thus affect directly the household businesses that generate income for countless individuals around the developing world. These results have important implications, among which the underestimation of the positive externalities of health insurance schemes.
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