We use three years of household panel data to analyze the effects of ill-health on household economic outcomes in rural Ethiopia. We examine the immediate effects of various ill-health measures on health expenditure and labor supply, the subsequent coping responses, and finally the effect on income and consumption. We find evidence of substantial economic risk in terms of increased health expenditure and reduced agricultural productivity. Households are able to smooth consumption by resorting to intra-household labor substitution, borrowing and depleting assets. However, maintaining current consumption through borrowing and depletion of assets is unlikely to be sustainable and displays the need for health financing reforms and safety nets that reduce the financial consequences of ill-health.
Bibliographical noteFunding Information
The authors acknowledge the financial support of the Netherlands Organisation for Scientific Research (NWO-WOTRO), grant number W07.45.103.00. The authors also thank two anonymous reviewers for useful comments and suggestions.
© 2021 World Bank. Published with license by Taylor & Francis Group, LLC.