Causal Effects of Health Shocks on Consumption and Debt: Quasi-Experimental Evidence from Bus Accident Injuries

30 Pages Posted: 8 Jul 2011 Last revised: 27 Aug 2013

See all articles by Manoj Mohanan

Manoj Mohanan

Duke University - Sanford School of Public Policy; Duke University - Department of Economics

Date Written: June 1, 2011

Abstract

Endogeneity in the health-wealth relationship presents a challenge for estimating causal effects of health shocks. Using a quasi-experimental study design, comprising exogenous shocks sustained as bus accident injuries in India, with, "controls," drawn from travelers on the same bus routes one year later, I present new evidence of causal effects of health shocks on household consumption and debt. Using primary household survey data, I find that households faced with the health shock-related expenditures, which were on average equal to two months of household income, are able to smooth consumption on food, housing, and festivals, with small reductions in education spending. Debt was the principal mechanism used by households to mitigate effects of the shock, leading to significantly larger levels of indebtedness among the exposed.

Keywords: Health Shocks, Causal Effects, Quasi-experimental, Health Expenditure, Consumption Smoothing, Debt, Road Traffic Accidents

JEL Classification: I15, D91, I30

Suggested Citation

Mohanan, Manoj, Causal Effects of Health Shocks on Consumption and Debt: Quasi-Experimental Evidence from Bus Accident Injuries (June 1, 2011). Review of Economics and Statistics, Vol. 95, No. 2, 2013; Economic Research Initiatives at Duke (ERID) Working Paper No. 106. Available at SSRN: https://ssrn.com/abstract=1881113

Manoj Mohanan (Contact Author)

Duke University - Sanford School of Public Policy ( email )

201 Science Drive
Box 90312
Durham, NC 27708-0239
United States

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

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