Endogenous health risks, poverty traps, and the roles of health insurance in poverty alleviation

Abstract

This paper builds an economic development model of endogenous health risks and poverty, presents the impact of health risks on economic growth and on poverty, and introduces mutual health insurance mechanisms to analyze their poverty alleviation effects. First, the study shows that health risks weaken the economy and are among the leading causes of poverty. Second, mutual health insurance can alleviate- but not completely eliminate-the negative impact of health risks on the economy. Third, proper health insurance arrangements can lift some or even all poor residents out of poverty. The main contribution of this study is that it endogenizes health risks by setting up a physical overdraft decision and uses it as a key point to formulate an economic development model of endogenous health risks and poverty for discussing the effects of health risks and health insurance on the economy and poverty.