Socioeconomic Challenges Caused by Health Shocks: A Household Poverty Perspective

South Korea has the highest out-of-pocket burden for medical expenses among the Organisation for Economic Co-operation and Development (OECD) member countries and has no formal sickness benefit system, along with United States and Switzerland, greatly increasing the risk of poverty due to a sudden illness. We identify the causal effect of health shocks on poverty status and explore the mechanisms of medical impoverishment by analyzing longitudinal data from 13 670 households that participated in the representative Korean Welfare Panel Study (KOWEPS) from 2007 to 2016. In this study, we define a health shock as a case in which no household members were hospitalized in the previous year, but together they had more than 30 days of hospitalization in this year. The propensity score matching method was combined with a mediation analysis in this work. The proportion of households in absolute poverty increased by 4.6-8.0 percentage points among households that experienced a health shock compared with matched controls. The selection effects due to health shock were estimated to be 5.6-8.2 percentage points. On average, a sudden hospitalization reduces annual non-medical expenditures and equivalized disposable income by just over 3.2 million KRW (2500 USD) and 1.2 million KRW (1000 USD), respectively. Health shock induces impoverishment after one year through both the medical expense and work capacity pathways, which explain 12.8% and 12.8% of the total effect, respectively. However, when we decompose the mediation effect of a health shock on poverty status after two years, we find that a health shock leads to poverty mainly through labor force nonparticipation (9.9%). Income stabilizing scheme to protect households that experience a health shock should be introduced as a policy alternative to confront the issue of medical impoverishment.

Shocks are ubiquitous in the daily life of rural people in Côte d'Ivoire, like many other developing countries. These shocked households have to choose between coping or not. With data from the Household Standard of Living Survey in Côte d'Ivoire (ENV2015), we use a probit model to analyze the factors influencing the decision of rural households to cope or not and then we identify the dominant strategies of these households facing shocks. A logit model allows us to understand the impact of the strategic choices made by these households on their well-being. We find that only health shocks have a positive influence on household’s coping decision. Also, for these various shocks (health shocks, natural shocks, economic shocks and shocks related to conflicts / crimes), the dominant strategies are the reduction of consumption, then the receipt of donations and borrowing. However, it is the reduction of food consumption, borrowing and the sale of assets that have a positive impact on these households welfare approximated by their poverty status.

The consequences of health shocks on households: Evidence from China

This study investigates the impacts of health shocks among older individuals on the dynamics of their living arrangements in Europe and the United States. Exploiting unpredicted health shocks, we use an event-study difference-in-differences approach to demonstrate that health shocks increase difficulties with activities of daily living and instrumental activities of daily living, thereby increasing the need for care. Our findings indicate that health shocks raise the probability of nursing home residency and co-residence with adult children by 0.7 and 1.4 percentage points in Europe, and by 2.1 and 1.8 percentage points in the U.S., respectively. Further analyses reveal that more generous long-term care public policies correlate with a higher probability of nursing home residency and a lower probability of co-residing with adult children, highlighting the significant role of public policies in household responses to health shocks. Additionally, we find that health shocks negatively impact adult children's labor supply, particularly in the U.S.

In contexts like Ethiopia, where formal health insurance and financial markets are underdeveloped, households face significant challenges in managing the economic consequences of health shocks. This study analyzes household coping strategies in response to illness and death shocks using two rounds of nationally representative Ethiopian Socioeconomic Survey data. A multivariate probit model is employed to capture the interdependent nature of five active coping strategies. The findings reveal that coping responses vary across household characteristics, including poverty status, gender of the household head, and rural-urban location. Death shocks commonly trigger increased labor participation, particularly among rural and female-headed households, while urban households often combine labor responses with asset sales or informal help. In contrast, illness shocks are primarily addressed through savings, with urban and male-headed households supplementing savings by selling assets, and rural households relying on a mix of savings and credit. Vulnerable groups – especially poor and female-headed households – tend to depend on coping mechanisms, such as asset liquidation and informal borrowing, which pose long-term risks to their economic stability. These results underscore the need for integrated policy interventions. Expanding community-based and social health insurance, providing accessible microfinance, strengthening preventive health programs, and enhancing targeted social protection are critical steps to mitigate the welfare losses associated with health shocks. Strengthening household resilience is essential not only for public health but also for advancing sustainable development and poverty reduction in Ethiopia and similar low-income settings.

BackgroundEconomic burden to households due to out-of-pocket expenditure (OOPE) is large in many Asian countries. Though studies suggest increasing household poverty due to high OOPE in developing countries, studies on association of multidimensional poverty and household health spending is limited. This paper tests the hypothesis that the multidimensionally poor are more likely to incur catastrophic health spending cutting across countries.Data and methodsData from the Poverty and Vulnerability Assessment (PVA) Survey carried out by the International Center for Integrated Mountain Development (ICIMOD) has been used in the analyses. The PVA survey was a comprehensive household survey that covered the mountainous regions of India, Nepal and Myanmar. A total of 2647 households from India, 2310 households in Nepal and 4290 households in Myanmar covered under the PVA survey. Poverty is measured in a multidimensional framework by including the dimensions of education, income and energy, water and sanitation using the Alkire and Foster method. Health shock is measured using the frequency of illness, family sickness and death of any family member in a reference period of one year. Catastrophic health expenditure is defined as 40% above the household’s capacity to pay.ResultsResults suggest that about three-fifths of the population in Myanmar, two-fifths of the population in Nepal and one-third of the population in India are multidimensionally poor. About 47% of the multidimensionally poor in India had incurred catastrophic health spending compared to 35% of the multidimensionally non-poor and the pattern was similar in both Nepal and Myanmar. The odds of incurring catastrophic health spending was 56% more among the multidimensionally poor than among the multidimensionally non-poor [95% CI: 1.35-1.76]. While health shocks to households are consistently significant predictors of catastrophic health spending cutting across country of residence, the educational attainment of the head of the household is not significant.ConclusionThe multidimensionally poor in the poorer regions are more likely to face health shocks and are less likely to afford professional health services. Increasing government spending on health and increasing households’ access to health insurance can reduce catastrophic health spending and multidimensional poverty.

Health shocks and children's school attainments in rural China

The impact of the correlation between health expenditure and survival probability on the demand for insurance

Health shocks are a critical driver of poverty in low- and middle-income countries (LMICs). This study investigates the impact of health shocks on household poverty risk in Nigeria and evaluates the protective capacity of existing health insurance mechanisms, using data from the 2023/2024 General Household Survey (n = 4,779 households). We first estimated household vulnerability using Chaudhuri's (2003) Vulnerability as Expected Poverty framework, addressing heteroskedasticity in consumption estimation via feasible generalized least squares. We then modeled the probability of household vulnerability following health shocks using probit regression. Finally, we implemented propensity score matching to isolate the effect of health shocks on households' vulnerability. Our results indicate that 56.1% and 59.2% of Nigerian households are vulnerable to poverty, using the international ($2.15/day) and national ($2.48/day) poverty lines, respectively. Vulnerable households are more prevalent in northern regions, rural areas, larger households, and poorer households. We found evidence that, based on the international poverty line, health shocks significantly increased the probability of household vulnerability (ATT = 0.053, SE = 0.023) compared to matched households without health shocks, with a slightly higher impact (ATT = 0.054, SE = 0.023) if using the national poverty line. Household size, dependency ratio, household head's education and employment status, and residence were significant predictors of vulnerability. Despite their potential, health insurance, covering only 2.2% of households, did not offer adequate protection against health shocks. This study provides robust evidence that health shocks increase households' vulnerability to poverty and perpetuate existing poverty. Financial protection measures need to be considered in broader poverty reduction policies.

An open question in the literature is whether families compensate or reinforce the impact of child health shocks. Discussions usually focus on one dimension of child investment. This paper examines multiple dimensions using household survey data on Chinese child twins whose average age is 11. We find that, compared with a twin sibling who did not suffer from negative early health shocks at ages 0-3, the other twin sibling who did suffer negative health shocks received RMB 305 more in terms of health investments, but received RMB 182 less in terms of educational investments in the 12 months prior to the survey. In terms of financial transfers over all dimensions of investment, the family acts as a net equalizer in response to early health shocks for children. We estimate a human capital production function and establish that, for this sample, early health shocks negatively affect child human capital, including health, education, and socioemotional skills. Compensating investments in health as measured by BMI reduce the adverse effects of health shocks by 50%, but exacerbate the adverse impact of shocks on educational attainment by 30%.

An open question in the literature is whether families compensate or reinforce the impact of child health shocks. Discussions usually focus on one dimension of child investment. This paper examines multiple dimensions using household survey data on Chinese child twins whose average age is 11. We find that, compared with a twin sibling who did not suffer from negative early health shocks at ages 0-3, the other twin sibling who did suffer negative health shocks received RMB 305 more in terms of health investments, but received RMB 182 less in terms of educational investments in the 12 months prior to the survey. In terms of financial transfers over all dimensions of investment, the family acts as a net equalizer in response to early health shocks for children. We estimate a human capital production function and establish that, for this sample, early health shocks negatively affect child human capital, including health, education, and socioemotional skills. Compensating investments in health as measured by BMI reduce the adverse effects of health shocks by 50%, but exacerbate the adverse impact of shocks on educational attainment by 30%.

Introduction: Reliance on out-of-pockets (OOP) payments for health services has continued to hamper access to quality healthcare across Nigeria. Socio-demographic and socio-economic characteristics of the gender of the household head as it influences and impacts health shocks and OOP payments have received very little attention globally. This study investigated the gender perspective on health shocks, health expenditures and coping mechanisms in North Central, Nigeria. Methods: This is a cross-sectional analytical study involving both quantitative and qualitative data collection methods. A total of 1,192 households were studied using multi-stage sampling technique in both rural and urban communities in North Central, Nigeria. Data was analysed with SPSS version 20, and qualitative analysis was done by thematic analysis. Results: The finding showed that 458 (38.4%) of the respondents were female-headed households (FHHs). Female-headed households were less educated, earned lower income, resided more in rural communities and were less insured than male-headed households (MHHs). Health shocks were higher among the FHHs and they also pay higher percentage of their household expenditure for healthcare through higher OOP payments. Also, more FHHs experienced Catastrophic Health Expenditure (CHE) and reported effects of health shocks on reduction in food consumption and loss of income than MHHs. Age, income, occupation and household size are all factors that influenced health shocks in this study. Conclusions: Innovative ways to financially protect women must be employed, to close up the equity gap and bring Nigeria closer to achieving UHC.

Despite a growing diabetes crisis, the nonmedical implications for young adults have gone virtually unexplored. We investigated the effects of diabetes on two key outcomes for this age group-schooling and earnings-and found that it delivers an increasingly common "health shock" to both. We identified effects in several measures of educational attainment, including a high school dropout rate that was six percentage points higher than among young adults without the disease. We also found lower employment and wages: A person with diabetes can conservatively expect to lose more than $160,000 over his or her working life, compared to a peer without the disease. For young adults with diabetes, having a parent with diabetes also leads to poorer outcomes than if one more parents do not have the disease-for example, reducing the likelihood of attending college by four to six percentage points, even after the child's health status is controlled for. These results highlight the urgency of attacking this growing health problem, as well as the need for measures such as in-school screening for whether diabetes's impact on individual learning and performance begins before the classic manifestations of clinical diabetes appear.

This paper uses two large panel data sets in China to study the effects of a health shock on household income mobility from 1991 to 2016. We compare outcomes of households with a member who receives a health shock with comparable households that do not receive any health shocks. To do so, we match on demographic and worker characteristics of household members. At the aggregated level, a health shock lowers the probability of getting out of the low-income trap by 8.4 percentage points. At the household level, a health shock lowers household income per capita by 13.1%, and income position by 3.9 percentiles. We show that the decrease in labor productivity, measured in hourly wage, explains the majority of household income losses. Households who become poor due to a health shock continue to exhibit lower income mobility after three years.

Background: Health burden in rural areas of developing countries is worsened by the limited coverage of health insurance. With constrained access to quality healthcare and constituting two thirds of Nigeria's poor, this study investigates how rural households cope with health shocks consequent on their socioeconomic status.Method: Data was collected from 600 households in Enugu using a questionnaire. Cross-tabulation, chi square and multiple regression statistical techniques were employed for data analysis. Findings: About 53% of the respondents were male household-heads while borrowing (47.65%), sales of assets (43.85%), diversion of funds (2.00%) and reduced expenditure (6.48%) were the main coping strategies. Education, occupation, and income statistically influenced the coping strategies (P < 0.005) and jointly accounted for 26.5% (R2 = 0.265, P < 0.001) of the variations in coping strategies.Conclusion: Having a rural healthcare policy and mainstreaming the informal sector into the national health insurance scheme will ameliorate health shocks among the rural poor.