Health Shocks and Consumtion Smoothing: Empirical Evidence from IFLS 2000 and 2007
HARRI GEMILANG (Pembimbing: Elan Satriawan, Dr., M.ec.), Elan Satriawan, Dr., M.ec.
Households face enormous problems caused by health shocks in terms of the existence of cost of medical care and loss in income. The contribution of this research related to the topic is twofold. Our first contribution is to investigate the effect of health shocks on household consumption, and our second contribution is to test whether financial institutions may help household to smooth consumption after health shocks suffered by adult members. Two waves of data have been collected from the Indonesian Family Life Survey (IFLS) which is a continuing panel survey of individuals, households and communities in Indonesia. We use IFLS3 and IFLS4 which are conducted in 2000 and 2007/2008, respectively. We introduce community fixed effects to account for unobserved household specific factors in a community. Our main finding is households are able to smooth consumption against health shocks. We also find that the closer households to financial institutions tend to have more assets and they are more likely to have a saving account. These results support the hypothesis that financial institutions may help households save and in turn help them to smooth consumption against illness shocks.
Kata Kunci : health shocks, consumption smoothing, IFLS, financial institution
