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AHEAD Working Papers Series

N° 03/2016

Woode, M. E. (2016). Parental Health Shocks and Schooling: The Impact of Mutual Health Insurance in Rwanda


Using a two-person general equilibrium overlapping generations (OLG) model, this paper studies how health insurance affects the impact of parental health shocks on child schooling. Individuals choose whether or not they want to incur a medical cost by seeking care in order to reduce the effect of health shocks on their labour market availability and productivity. The theoretical results show that, health shocks negatively affect schooling if the parent is uninsured. Health shocks negatively affect schooling irrespective of insurance status. The effect is however higher for the uninsured if the health shock is severe, that is if it significantly affects the earning capacity of the parent. However, if the health shock is severe (incapacitating) or sudden in nature, there is a discernible mitigating effect of health insurance on the negative impact of parental ill health on child schooling. The results are tested empirically using data from the third Integrated Household Living Conditions Survey (EICV) for Rwanda and collected in 2011. For health shocks to the father empirical findings confirm the theoretical results obtained. Shocks to the mother however appear to neither to significantly affect schooling.