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Financial Consequences of Ill Health and Informal Coping Mechanisms in Indonesia

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  • Robert Sparrow
  • Ellen Van de Poel
  • Gracia Hadiwidjaja
  • Athia Yumna
  • Nila Warda
  • Asep Suryahadi

Abstract

We assess the financial risk of ill health for households in Indonesia, the role of informal coping strategies, and the effectiveness of these strategies in smoothing consumption. Based on household panel data, we find evidence of financial risk from illness through medical expenses, while income from informal wage labour is exposed to risk for the poor and income from self-employed business activities for the non-poor. However, this lead to imperfect consumption smoothing only for the rural population and the poorest quartile; the non-poor seem to be able to maintain current spending. Borrowing and drawing on buffers, such as savings and assets, seem to be key informal coping strategies for the poor, which infers potential negative long term effects. While these results suggest scope for public intervention, the financial risk from income loss for the rural poor is beyond public health care financing reforms. Rather, formal sector employment, which reduces income risks, seems to be a key instrument for financial protection from illness.

Suggested Citation

  • Robert Sparrow & Ellen Van de Poel & Gracia Hadiwidjaja & Athia Yumna & Nila Warda & Asep Suryahadi, 2012. "Financial Consequences of Ill Health and Informal Coping Mechanisms in Indonesia," Departmental Working Papers 2012-07, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2012-07
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    References listed on IDEAS

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    Cited by:

    1. Dhanaraj, Sowmya, 2014. "Health shocks and coping strategies: State health insurance scheme of Andhra Pradesh, India," WIDER Working Paper Series 003, World Institute for Development Economic Research (UNU-WIDER).
    2. Sowmya Dhanaraj, 2014. "Health Shocks and Coping Strategies: State Health Insurance Scheme of Andhra Pradesh, India," WIDER Working Paper Series wp-2014-003, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    Illness; income; consumption smoothing; coping strategies; Indonesia;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

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