Research Insights: How Do Economic Networks Contribute to the Spread and Mitigation of Health Shocks?
Small firm owners facing idiosyncratic shocks adjust production by cutting spending and reducing their demand for external workers. These shocks propagate to other local households with whom shocked firms trade inputs and labor through local supply-chain and labor market networks, leading to declines in transactions, income, and consumption. The total indirect effects are larger than the direct effects: a US$1 decline in a shocked households business spending reduces aggregate consumption by US$1.7. Both the direct and indirect effects are mitigated by incoming transfers to shocked households with access to risk-sharing networks. Therefore, having access to health insurance protects both directly affected households as well as those who conduct transactions with them.
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| Language: | English |
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Inter-American Development Bank
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| Subjects: | Health, Entrepreneurship, Labor Market, Supply Chain, Small Business, Labor Force, Firms Dynamics, Disease, Labor, Economy, Health Insurance, Informal Firm, D13 - Household Production and Intrahousehold Allocation, D22 - Firm Behavior: Empirical Analysis, I15 - Health and Economic Development, O10 - Economic Development: General, Q12 - Micro Analysis of Farm Firms Farm Households and Farm Input Markets, Propagation;Firms;labor market, |
| Online Access: | http://dx.doi.org/10.18235/0004420 https://publications.iadb.org/en/research-insights-how-do-economic-networks-contribute-spread-and-mitigation-health-shocks |
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