Elderly's Health Shocks and Household's Ex-ante Poverty in India*

Evidence on the association between traditional poverty measures and health is widely available in the literature. However, the traditional ex-post poverty measures neglect many aspects of household welfare by overlooking the risk that a household faces in view of fewer resources available to it. Household's vulnerability to expected poverty is an alternative measure which allows quantification of welfare loss due to poverty as well as due to other sources of uncertainty. Using two waves of independent cross-sectional data collected by National Sample Survey Organization (NSSO) in the years 1995–96 and 2004, the paper aims to estimate household's vulnerability to poverty for Indian households with elderly and examine whether health shocks from the elderly members translated into the risk of household's poverty in the near future. The econometric results accounting for possible endogenous relationship between health and vulnerability suggest that households with higher concentration of aged members with poor health and disability are more vulnerable to poverty. Thus, economic policies, for general population as well as for aged, should be integrated well with the health policies. Sufficient healthcare facilities and affordable health insurance is needed to be provided to the households with aged — in particular for those living in rural and other poverty prone areas and communities. This is a necessary step to eradicate poverty from poor households and to prevent non-poor households from falling into poverty in the near future.