1. “Insuring Consumption against Illness,” Gertler, P. and J. Gruber(2002)

2. Impacts of adverse health shocks We face a calamity when my husband gets ill. Our life comes to a halt until he recovers and goes back to work. Narayan et al.(2000) 26 year-old man in Lao Cai, Vietman:  richest  one of poorest in his community (because of his daughter's severe illness) Abundant anecdotal evidence.

3. Two main economic costs Medical costs associated with illness The loss of income associated with reduced labor supply and productivity

4. The Effect on Household’s Consumption If these two costs are sizable and unpredictable  consumption may not be perfectly insured Imperfect insurance of consumption  consumption↓ during periods of shocks  utility ↓(welfare ↓) The study helps us to understand the importance of health insurance?

5. Insurance market  Formal: NHI, others (self insurance)  Informal insurance market Savings Others: selling assets, transfers from their families and social support networks, borrowing from local credit markets Labor Market  Work or not  Labor substitution among family members

6. Literature - No impact on consumption No impact on minor illness Townsend, R.(1995)  “Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies,”  Journal of Economic Perspectives, Vol.9(3), pp83-102 Kochar, A. (1995)  “Explaning Household Vulnerability of Idiosyncratic Income Shocks.”  American Economic Review, Vol.85(2), pp159-64.

7. Goal The effect of health shocks on labor supply  work or not  labor supply of other family members The effect of health shocks on earning  medical spending  earning The effect of health shocks on earning  consumption  other family member’s consumption

8. Gertler and Gruber(2002) Health shocks  labor supply  earning  medical spending

9. Data Indonesian Resource Mobilization Study:  panel (1991 and 1993)  3933 households Household Information  health  consumption  income  other family members

10. Health measure Activities of daily living index (ADL)  basic and intermediate ADL  objective measure  major illness Illness symptoms  Illness symptoms and chronic illness symptom  subjective measure  minor illness