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

We analyze the effect of adverse health shocks on households’ different expenditure shares using a difference in differences approach. We find that households engage in substitution between health and food spending in response to the negative health shocks. We find substantial heterogeneity in this trade-off between current and future health mediated by access to social protection, job contract type, and location (urban-rural). Households from rural areas, with heads holding informal jobs, and without access to safety nets, are more vulnerable than others. We discuss several policy implications.