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Financial Consequences of Ill Health and Informal Coping Mechanisms in Indonesia

Robert Sparrow (), Ellen Van de Poel (), Gracia Hadiwidjaja, Athia Yumna (), Nila Warda () and Asep Suryahadi

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: We assess the financial risk of ill health for households in Indonesia, the role of informal coping strategies, and the effectiveness of these strategies in smoothing consumption. Based on household panel data, we find evidence of financial risk from illness through medical expenses, while income from informal wage labour is exposed to risk for the poor and income from self-employed business activities for the non-poor. However, this lead to imperfect consumption smoothing only for the rural population and the poorest quartile; the non-poor seem to be able to maintain current spending. Borrowing and drawing on buffers, such as savings and assets, seem to be key informal coping strategies for the poor, which infers potential negative long term effects. While these results suggest scope for public intervention, the financial risk from income loss for the rural poor is beyond public health care financing reforms. Rather, formal sector employment, which reduces income risks, seems to be a key instrument for financial protection from illness.

Keywords: Illness; income; consumption smoothing; coping strategies; Indonesia (search for similar items in EconPapers)
JEL-codes: I15 O15 (search for similar items in EconPapers)
Pages: 32
Date: 2012
New Economics Papers: this item is included in nep-dev, nep-hea, nep-iue and nep-sea
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Citations: View citations in EconPapers (3)

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