Health shocks and households’ welfare in Ghana: does social assistance mitigate the effects?

Purpose - Health shocks are among the factors that have impeded households from experiencing better welfare. To mitigate the consequences of these shocks, individuals have sought to enrol in a formal insurance scheme or borrow from banks. This study estimates the effects of health shocks on households' welfare while examining the mitigating role of social assistance in Ghana. Design/methodology/approach - The study utilized the three-stage least squares and feasible generalized least squares to estimate the impact of health shocks on households' welfare. Findings - The authors find that health shocks put households at risk, particularly disability and severe illness, which significantly limits individuals’ ability to smooth consumption to increase welfare. We further find that hospitalization due to illness significantly allows households to increase welfare through consumption. Finally, we find that social assistance has the potential to reduce these adverse effects of shocks conditioned on the type of shock and the outcome variable in question. Research limitations/implications - First, we only used cross-sectional data for the two waves and therefore lacked panel data across time for analyses. Second, the data do not provide information on the exact amount of cash received by beneficiaries, so it was quite impossible to measure the exact effect of social assistance on welfare. We could only track whether or not having such assistance could mitigate the effect of a health shock. Practical implications - The practical implication of the findings is that Ghana needs to build a resilient health system in order to withstand the health shocks of individuals. Originality/value - No study has attempted to investigate the differential effect of health shocks – hospitalization, disability and labour days lost due to illness in Ghana. Our choice is dependent on the fact that these shocks have been an issue for many households in Ghana, thus the need to examine their impact on individual well-being. Second, social assistance has been Ghana’s flagship social protection programme, but what is missing in the literature is whether this programme is capable of reducing the effect of health shocks faced by beneficiaries’ households in Ghana.