The Incidence of Health Shocks, Formal Health Insurance, and Informal Coping Mechanisms

in Perspectives on Global Development and Technology
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In recent years, both theoretical and empirical research has accumulated in development economics literature regarding household behavior in response to shocks in developing countries. The literature especially has explored deeply the impact of weather-related shocks—such as droughts and floods—and the efficiency of informal mechanisms to cope with these shocks. In sharp contrast, our knowledge on the economics of health shocks in low-income developing countries is rather limited. A few studies have documented that low incomes and poor health insurance coverage account for catastrophic medical expenditures in the event of a health shock. This study uses a combination of Ghanaian household survey datasets to examine the different coping mechanisms employed by uninsured households to protect themselves from the incidence of health shocks. In addition, it explores the impact of formal health insurance (the National Health Insurance Scheme) on households’ out-of-pocket spending and catastrophic health expenditures.



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Although in the case of Bales (2013) a thresholds of 14 days was used, the data on oop show that ten days of being bedridden and three days of hospitalization may cause a health shock that is strong enough to send the household into vulnerability.


  • Distribution of medical bill financers 1998/99-2012/13.

    notes: this figure plots a bar chart of the distribution of financiers of medical bills including cost of outpatient and inpatient admissions.

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