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FIdES: Formal Insurance and Productive Effects Study

FIdES: Formal Insurance and Productive Effects Study

Health problems are a serious threat for most households in developing countries (see e.g. Wagstaff, 2007; Wagstaff and Doorslaer, 2003; De Weerdt and Dercon, 2006; Grimm et al., 2015). Treatment often requires forgoing expenditures for other basic necessities including food, depleting assets or withdrawing children from school (Dercon, 2002). Untreated health problems in turn can significantly reduce the capacity to generate income in the future. Further inefficiencies arise because households build up precautionary savings, often in assets that are less productive but easy to liquidate to smooth consumption if such shocks arise. In consequence there are little to no resources left for investment in more risky but also more productive assets and activities. Policy has recognized this problem and many developing countries have either started or are at least thinking about introducing health insurance (e.g. Ethiopia, Ghana and Rwanda). However, there is not yet a consensus on the best way of doing it (see e.g. Lagomarsino et al., 2012). Countries experiment with private, public and community based schemes to see how a viable and effective system with wide if not universal coverage can be build up.

The purpose of the Formal Insurance & Productive Effects Study (FIdES) is to analyze the direct effects of community based health insurance (CBHI) on health care utilization and health, as well as, the indirect effects of such insurance on transfer networks, investment in productive farm and non-farm capital in Burkina Faso. The data collected within FIdES shows that in Burkina Faso health shocks are actually the most important risk to households; over half of all reported shocks are health shocks, other shocks like droughts only play a minor role (Grimm et al., 2015). An innovation of the project is that it also allows assessing the effects of insurance on the beneficiaries' traditional risk sharing networks. In the context at hand relatives in urban areas, often owners of small firms, provide most of the financial resources needed by rural households to cope with shocks, in particular health shocks. Several recent papers suggest that sharing obligations are an important obstacle to the establishment and growth of micro and small enterprises (Hoff and Sen, 2006; Baland et al., 2011; Jakiela and Ozier, 2012; Grimm et al., 2016). A related question is then whether in turn the introduction of formal insurance can enhance investment and employment generation in such enterprises as incentives are altered and more resources become available potentially.

So far, little is known about how the introduction of formal insurance affects the traditional risk sharing network and in turn other economic outcomes, such as enterprise investment. Moreover, so far, empirical studies, either look at the effects of formal insurance on transfers (see e.g. Karlijn, 2015) or on investment (see e.g. Cai, 2013; Karlan et al., 2014; McKenzie and Groh, 2014). To our knowledge, the results from this project will constitute the first causal evidence on the relationship between insurance of health risks and productive investment.

Project Partners

The project is conducted in cooperation with the Institut de Recherche en Sciences de Santé (IRSS) in Burkina Faso and the German Development Institute (GDI). The IRSS is one of four technical divisions of the Centre Nationale de la Recherche Scientifique et Technologique (CNRST) and the leading research institution on public health issues in Burkina Faso. The health insurance intervention under scrutiny in this project is being implemented by a local non-for-profit institution, Asmade (L'association Songui Manégré / Aide au Développement Endogène). Asmade is supported by the Burkinabè Government, the World Bank and a Belgian NGO (Solsoc) among others. The institution has substantial experience with the provision of insurance and other social services in Burkina Faso.

Principal Investigator(s) at the University Prof. Dr. Michael Grimm (Lehrstuhl für Development Economics)
Project period 23.08.2013 - 31.01.2015
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