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By: Seomotion - Re: Bus Accidents as Random Health Shocks
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« Snyder on "The Wealth of Politicians and Rents to Political Office in the US, 1840-1870" | Main | Publication Bias in Drug Trials »
22 February 2008
Bus Accidents as Random Health Shocks
A major item of interest in applied health economics is to understand the impact of health shocks on household income, investments and consumption. This relation is particularly important in developing countries that don’t have programs like universal health insurance or social insurance like Medicaid. Alas it’s also a major challenge to establish causal effects and mechanisms through which the shocks might operate. A main culprit is endogeneity, since health affects wealth and vice versa. As result there is a huge and truly inter-disciplinary literature on the topic, much of it with suspicious identification strategies.
The main struggle is to find a plausibly exogenous exposure to health shocks that have real-life relevance. A new paper by Manoj Mohanan takes this challenge seriously and looks at the effect of health shocks from bus accidents on household’s consumption, and examines what mechanisms households rely on to smooth consumption. (Full disclosure: Manoj is a classmate of mine, and I really like his work!)
To address the endogeneity problem, the paper focuses on people who have been in bus accidents as recorded by the state-run bus company in Karnataka, India. Clearly, finding a good control group is critical: people who travel on public buses may be different from those who don’t. For starters, they actually took the risk of getting on a bus – if you have ever been on the road in a developing country you’ll know what this means. Manoj’s approach is to select unexposed individuals among travelers on the same bus route, after matching on age, sex and geographic area of residence. Hence, conditional on these factors, the bus accident can be treated as exogenous.
He then compares the two groups on various dimensions. He finds that households reduce educational and festival spending by a large amount, but appear to be able to smooth food and housing consumption. He is unable to find effects on assets or labor supply. The principal coping mechanism is debt accumulation. Overall this suggests that not all is well: debt traps aside, reducing investments in education could be very costly in the long run (on this point see also Chetty and Looney, 2006).
Posted by Sebastian Bauhoff at February 22, 2008 10:00 AM
Comments
An interesting paper, thanks for pointing it out. I looked at the draft to see what kind of injuries these people sustained, and was struck by how low the baseline health of the population was. 87% of the people who were in bus accidents reported that they had a "severe disability" a year after the accident, but a full 44% of the "unexposed" group reported that they had a severe disability too. The accidents definitely affected health a lot, which is good for his study, but you get a little snapshot of a very unhealthy population (or perhaps some translation problems).
Posted by: Andy Eggers at February 23, 2008 12:17 AM
Great article. Last week i saw terrible bus accident near Red Square in Moscow. It was awful. I think that all passengers will have "severe disability" for few years.
I know what I am talking aboutm because I was in car crash two years ago, and now, I am afraid to drive a car.
Be careful at the roads!
Posted by: Seomotion at February 23, 2008 4:41 PM