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Insuring Consumption Against Illness.

Paul Gertler1, Jonathan Gruber2

  • 1Haas School of Business, University of California, Berkeley, CA.

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This summary is machine-generated.

Major illness significantly disrupts economic stability in developing nations. Indonesian families show imperfect consumption insurance against major illnesses, highlighting the need for public disability insurance and medical care subsidies.

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Area of Science:

  • Health economics
  • Development economics
  • Social insurance

Background:

  • Major illness represents a significant and unpredictable shock to economic opportunities in developing countries.
  • Understanding household consumption smoothing capacity is crucial for socioeconomic stability.

Purpose of the Study:

  • To investigate the extent to which families in developing countries can insure consumption against major illness.
  • To quantify the economic costs associated with major illness and assess the effectiveness of existing consumption insurance mechanisms.

Main Methods:

  • Utilized a unique panel data set from Indonesia.
  • Combined detailed health status measures with comprehensive consumption information.
  • Employed econometric analysis to estimate consumption insurance over illness episodes.

Main Results:

  • Identified significant economic costs linked to major illness episodes.
  • Found evidence of very imperfect consumption insurance against major illness.
  • Quantified the extent of consumption volatility experienced by households during illness.

Conclusions:

  • Major illness poses a substantial threat to household economic well-being in developing countries.
  • Current household coping mechanisms provide inadequate insurance against consumption shocks from illness.
  • Public disability insurance and medical care subsidies could enhance welfare by improving consumption insurance.