Resilience and Health Shocks
In September 2014, researchers Laura Paul and Ghada Elabed from the Agricultural and Resource Economics Department of the University of California, Davis, collaborated with Megan Gash of Freedom from Hunger to conduct a field experiment in rural Burkina Faso aimed at understanding how households respond to shocks and build resilience to face future shocks. In arid agricultural regions such as the Passoré Province of Burkina Faso, households have access to few resources for facing numerous health and environmental shocks. Economic games were used to introduce health savings accounts (HSAs) and health loans to participants, mimicking real-life products by a local financial service provider (FSP). Participants encountered real-life scenarios and were asked to manage shocks with the resources provided through their game, and their decisions on the use of those resources were recorded. There were real economic incentives to participate; the women received monetary rewards for attendance as well as for their final wealth level at the end of the game. The research identified key strategies that households used to respond to shocks—with and without access to the HSA and loan. This research sought to understand whether households using these products were better off in light of these trade-offs and limitations. The research also aimed to help FSPs better understand the potential impacts of financial tools created specifically to cope with shocks and build resilience.
The findings suggest that HSA and the health loan have the potential to help the poor better manage health shocks, leaving them better off financially and reducing their long-term costs. It highlights the value of FSPs and development practitioners investing in the design and development of shock-specific financial tools.