Abstract:
Households experiencing health shocks (HS-death and disability) are at the risk of incurring
substantial health expenditure as they seek treatment and experience loss of productive work
hours, earnings, and declines in consumption. Coping with the economic consequences of HS
and maintaining consumption in the absence of formal insurance, households respond with their
own risk reduction, mitigation, and coping strategy (CS). However, not much is known either
about the impact of HS on the variation of households‟ consumption (HC) or the capacity of
existing risk sharing arrangements in smoothing consumption against HS in Nigeria. This study
was therefore, designed to investigate the effect of HS on the HC, identify the strategies adopted
by households to deal with HS and examine the effect of the most commonly used CS on
consumption.
The Full-Insurance theory provided the theoretical framework for the study. Data were obtained
from two waves of the General Household Survey (GHS) panel, 2011 and 2013, produced by the
National Bureau of Statistics. The GHS covered 5,000 households across the six geopolitical
zones. Two measures of HS: death of a household member and disability that incapacitated a
household member from carrying out normal activities of daily living were used. The HC was
divided into food and non-food. A fixed effect model was estimated to examine the impact of HS
on change in HC. Multinomial logit model was used to determine the CS used by households in
the face of HS. The CSs were categorized into three groups: sales of assets; borrowings; and
other-strategies. The effects of CS on consumption were computed by regressing the interaction
term of predicted probability and measure of HS on household consumption. Estimates were
validated at
p 0.05 .
The average household size was 7±4 persons, and the average age of household member was
27.0±20.0 years. Thirty-one percent of households were both male-headed and married. Twenty nine percent and Sixteen percent of sampled households reported disability and death
respectively. Disability
( 4.18) t
and death
( 2.09) t
had a significant negative effect on food
consumption. Disability decreased food consumption of households by 8.0%, while death
reduced it by 23.0%. Disability
( 5.47) t
as well as death
( 3.48) t
of household member had
significant negative impact on non-food consumption. Sales of assets and borrowing
iii
significantly affected the ability of households to maintain consumption with likelihood of 0.67
and 0.54, respectively. Sales of assets
( 6.10) t
and borrowing
( 2.9) t
had positive and
significant impacts on consumption, while other-strategies
( 4.55) t
were negative and
significant.
Health shocks reduced household consumption in Nigeria. Sales of assets and borrowing were
the most prominent coping strategies. Emphasis on measures geared towards providing financial
protection against health shocks such as payment of disability benefits and assistance to
households that report death should be intensified by the government.