Health Shocks and Permanent Income Loss: The Household Business Channel

Abstract

"The monetary and time costs associated with illness may affect directly the household businesses that generate income for countless individuals around the developing world. This study uses an original Vietnamese panel data to provide strong evidence that health shocks affecting microenterprises operators and/or other household members have a negative impact on the business operations. Although intra-household labour reallocation mitigate the direct labour supply decrease, large out-of- pocket health expenditures have the potential of crowding out business-related expenditures, and to significantly decrease investment. These results have important implications, among which the underestimation of the positive externalities of health insurance schemes."