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Breaking the Perverse Health-debt Cycle in Sri Lanka: Policy Options

Ramanie Samaratunge, Ajantha Sisira Kumara and Lakmal Abeysekera

Journal of Policy Modeling, 2020, vol. 42, issue 3, 728-745

Abstract: This paper proposes a finite mixture model to examine how health adversities influence indebtedness of Sri Lankan households. After accounting for unobserved heterogeneity, our empirical analysis reveals that households headed by ill-health members and those with hospitalization are inevitably more vulnerable to indebtedness. The ill-health status of other working-age members also creates milder effects on household indebtedness. We confirm that the health-debt cycle is more severe for urban households, compared to their rural counterparts. The study is testimony to re-emphasizing the role of government in providing much-needed financial protection to vulnerable households and implementing differentiated-policy packages for urban and rural sectors in order to effectively break the health-debt cycle.

Keywords: Ill-health; Household surveys; Indebtedness; Unobserved-heterogeneity; Living sector (search for similar items in EconPapers)
JEL-codes: C54 C55 I12 I31 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jpolmod.2020.01.003

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