Household response to health shocks: Does broadband infrastructure have a role to play?

Abstract

This paper investigates the household response to health shocks and the mitigating effect of broadband infrastructure using micro survey data from the China Health and Retirement Longitudinal Study (CHARLS). This study contributes to the literature by exploiting the “Broadband China” policy to address endogeneity issues and constructing multidimensional health indicators to assess the distinct effects of various health status changes on household outcomes. We find that household income from agricultural productivity and food consumption are well insured against health shocks, while health shocks significantly reduce income from self-employed activities and increase nonfood consumption. In addition, our findings suggest that broadband infrastructure plays an important role in reducing the negative impact of health shocks through two important channels: optimizing financial asset management and increasing public transfers from the government. These findings highlight the importance of broadband development, which can help rural households better cope with unexpected health shocks and reduce the likelihood of falling into poverty.