The Spending Responses to Adverse Health Shocks: Evidence from a Panel of Colombian Households


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With Darwin Cortés and Andrés Gallegos

Abstract: We analyze the effect of adverse health shocks on different expenditure shares of households using a difference in differences approach. We find that households engage in substitution between health expenditures and food expenditures. We also find important heterogeneity in this trade-off between present health and future health mediated by access to social protection, job contract type, and location (urban-rural). We document that households from rural areas headed by persons with informal jobs are more vulnerable. We discuss several policy implications.