Financial Development and Health

JOB MARKET PAPER

In this paper, I examine how development of the financial sector affects health, using a nationwide natural experiment. I exploit a policy of the Reserve Bank of India from 2005 that introduces exogenous variation in bank presence. The objective of the policy is to incentivize banks to set up new branches in underbanked districts. An underbanked district is defined as a district that has a population-to-branch ratio that exceeds the national average. Using a regression discontinuity design, I compare households in districts that have a ratio just above and just below the national average. I find a strong and robust positive effect on health. Six years after the policy was introduced, households in treatment districts are 36 percent less likely to be affected by an illness in a given month. This positively impacts their economic situation; they gain half a day of work or education and spend significantly less on medical expenses. Ten years after the policy was introduced, I observe persistently lower morbidity rates, higher vaccination rates, and lower risks associated with pregnancies. I provide evidence that two previously understudied aspects of financial development played an important role: increased access to health insurance for households and increased access to credit for health care providers, allowing the latter to expand supply.

Presented at:

AFA Poster Session, Applied Young Economist Webinar (AYEW), Columbia Development Colloquium, Columbia Finance Seminar, Columbia PhD Finance Seminar, Development and Political Econ SF Bay Area PhD Student Conference (DevPEC), European Finance Association (EFA) Doctoral Tutorial (scheduled), International Conference on Globalization and Development (GlaD) (scheduled), Macro Finance Society Workshop, North East Universities Development Consortium (NEUDC), Transatlantic Doctoral Conference (LBS), Universitat Pompeu Fabra Internal Applied Econ Seminar, Webinar Series in Finance and Development (WEFIDEV)

Please note that I will be on the job market next year, in 2021/2022.

Thus the paper and any results are preliminary at this stage.

Paper in Six Graphs

Underbanked Districts in India

Pres_dis_map_all_200331.png
pap_dis_hist_200328_add_mean_bw.png

Histogram of District

Population-To-Branch Ratio

fin_sav_bank_acc_2nddeg_wquad_210111.png

Households Gain Access

to Savings Accounts

pres_dis_map_gujarat.png

Comparison of Households

pap_dis_6MOF_func_lice_bnorrb_A_200825.p

Dynamics of Branch Opening

Corresponds to Policy

health_min_ill_uadin30_y_2nddeg_wquad_21

Households Miss Fewer Days 

of Work or Education

Due to Illness