Ill-health, savings and portfolio choices in developing economies

This paper examines the effect of adult health on the savings and portfolio decisions of rural Pakistani households. It also tests whether such effects result because ill-health affects income and the rates of return on specific assets. By so doing, it provides evidence on the sensitivity of savings to income changes and to interest rates. I find that expectations of future ill-health increase overall savings, but reduce investments in productive assets thereby forging a link between health and poverty. I also find that the number of males in a household condition the impact of the ill-health of any given individual on savings outcomes. (C) 2003 Elsevier B.V. All rights reserved.