An Empirical Analysis of Health Shocks and Informal Risk Sharing Networks

47 Pages Posted: 13 Dec 2017

See all articles by Andinet Woldemichael

Andinet Woldemichael

African Development Bank Group

Shiferaw Gurmu

Georgia State University - Department of Economics

Date Written: July 2017

Abstract

Using panel household survey data from rural Ethiopia, we investigate informal risk sharing against health shocks in the presence of multiple risk sharing networks. We find that neither short-term nor long-term health shocks are insured through transfers from networks such as friends, neighbors, and members of informal associations. However, networks related along bloodline such as extended family members provide assistance when health shocks are long-term such as disabilities. The results show that these networks strategically complement planned component of their transfers which are made on a regular basis such as remittance, entitlement, or chop money. Moreover, we find significant history dependence in transfers from not only genetically distant networks but also extended family members as well as formal institutions, which seems to discourage dependency. Finally, the findings suggest significant heterogeneity in transfers.

Keywords: Altruism, crowding out, poverty, social networks, health insurance

JEL Classification: D01, D10, D64, D85, I1

Suggested Citation

Woldemichael, Andinet and Gurmu, Shiferaw, An Empirical Analysis of Health Shocks and Informal Risk Sharing Networks (July 2017). Andrew Young School of Policy Studies Research Paper Series No. 17-15. Available at SSRN: https://ssrn.com/abstract=3086060 or http://dx.doi.org/10.2139/ssrn.3086060

Andinet Woldemichael

African Development Bank Group ( email )

15 Avenue du Ghana
P.O.Box 323-1002
Tunis-Belvedère
Tunisia

Shiferaw Gurmu (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

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