Barriers to Health Care: the Relief Effect of Remittances in Tajikistan Sandra Pellet and Florence Jusot Abstract While the impact of remittances on consumption and investment is well studied, there are fewer studies exploring their influence on healthcare utilization. In a context of cost barriers to healthcare and heavy reliance on migration, it is legitimate to ask whether remittances alleviate the budget constraint and allow healthcare consumption in migrant- sending households. Here we investigate the effect of remittances on foregone care, access to care and expenditure using a two-part modeling, using data from the 2007 Tajikistan Living Standards Survey. Indeed, in Tajikistan, out-of-pocket expenditure increased substantially during the last two decades. In the meantime, labor migrations and the remittances increased, reaching 50% of GDP. At the same time, health needs may have been a factor in sending someone abroad to face tremendous out-of-pocket expenses, inducing endogeneity. Using the 2SLS procedure, we address this hypothesis. We find an income effect of currently abroad migrants' remittances on healthcare access. Sandra Pellet PSL Research University Université Paris-Dauphine, LEDa-LEGOS Place Maréchal de Lattre de Tassigny 75016 Paris (France) Contact: [email protected] Florence Jusot PSL Research University Université Paris-Dauphine, LEDa-LEGOS Place Maréchal de Lattre de Tassigny 75016 Paris (France) Contact: [email protected] Keywords: Migration, Remittances, Health care use, Unmet needs, Postsocialist Transition. JEL codes: D6; F2; I1; I3 1. Introduction Migrants’ transfers play a critical role in the economy of the country of origin. An indicator of their role is the significant contribution to GDP that remittances make in many developing countries. Small developing economies tend to show much higher remittance dependency than giant emergent economies, such as India and China, which are the top recipient countries of remittances in total amount. For example, 25% of households in Perù receive migrants’ transfers, which accounted for more than one fifth of the recipients’ income (Cox et al., 1998) and remittances in 2014 accounted for 42% of the GDP in Tajikistan, 30% in Kyrgyz Republic, and 29% in Nepal (Ratha, 2016). These examples show the dependency many developing economies have on private transfers sent from abroad by households’ members or relatives. Remittances may also have a long-term effect on economic growth through their impact on capital and human capital accumulation (Rapoport and Docquier, 2006; Taylor and Mora 2006; Clément 2011). Since the 2000s, migration studies have increasingly investigated the use of remittances for non-durable and durable consumption, as well as for productive investment in local enterprises. These studies provide mixed results on the impact of remittances. Nevertheless, they all confirm the key role that migrants’ transfer play in emerging economies. The effect of remittances on human capital investment and human capital accumulation has also been explored in response to the potential longer- term impact these investments may have on endogenous growth (Gatskova et al. 2017). For example, some studies have focused on the effect of remittances on children's educational outcomes (Hanson and Woodruff 2003; McKenzie and Rapoport 2006 ; Bennett et al. 2013). There is also a growing body of literature that is focused on the potential impact of remittances on healthcare expenditure and health outcomes (Hildebrandt and McKenzie, 2005; Amuedo-Dorantes and Pozo, 2011). The demand for health care is in some aspects comparable to the demand for food, which is necessary to satisfy short-term needs. This demand also corresponds, as the demand for education does, to an investment in human capital and more specifically, to its health component, which contributes to health capital accumulation. According to the health capital model of Grossman (1972), individuals have incentive to invest in their health capital in order to compensate the natural depreciation of health with age. On one hand, it is a consumption motive because the stock of health capital is one of the arguments for utility function, although on the other hand, it is a productive motive since the stock of health capital determines the individuals’ ability to work and thus produce a disposable income. Within this framework, remittances may release the intertemporal budget constraint and give individuals additional possibilities of investment in health capital via either additional health expenditures or additional time dedicated to health improvement. In recent studies focused on health issues, most investigate the effect of migrants’ transfers on health outcomes (Kanaiaupuni and Donato, 1999; Franck and Hummer, 2002), whereas less attention has been paid to their impact on access to care (Valero-Gil, 2009). However, health expenditures are of particular interest since they constitutes a particular type of expenditures. First, even if they occur more or less often depending on initial health status, socioeconomic characteristics or local opportunities (healthcare supply, transport, accessibility etc.), they may be exceptions and not necessarily predictable. Second, when health cares needs occur, consecutive health expenditures may be catastrophic, if compared to other consumption. Thus, these costs may act as a barrier to the consumption of care and this restricts care access and cause care renunciation. As a consequence, remittances are expected to improve access to expensive health care, or to health care with large out-of-pockets payments such as in liberal healthcare systems or corrupted systems. For instance, in former Soviet areas, where the healthcare system was inherited from the universal socialist system, the share of out-of-pocket expenses is very high due to the existence of informal payments. It is the case in Tajikistan where out-of-pocket expenditures increased substantially through formal and informal channels in the past two decades (Khodjamurodov and Rechel, 2010). In this study, we investigate the effect(s) of remittances on care access in Tajikistan. Few studies have analyzed the impact of remittances on healthcare expenditures, and most of them don’t account for health needs such as in Kan (2016). Therefore, these investigations fail to provide evidence on the impact of remittances on the appropriateness of healthcare use according to the needs of the population. To fill this gap, we analyzed the impact of remittances on healthcare use after controlling for health needs that were encoded by three indicators: the existence of any health expenditure (in order to measure the impact of remittances on access to care), the conditional amount of health expenditure (in order to measure their impact on the intensity of the health care received) and the existence of forgone care during the previous year (in order to assess their impact on unmet needs). We also attempt to distinguish between health expenditure components. Remittances are not likely to affect unpredictable and predictable health expenditures in the same way, and this difference likely depends on the type of health problem. Either households call on the migrant regularly for paying predictable care, for example, because of the presence of a chronically ill or pregnant person in the household; or remittances are mobilized in cases of an unexpected emergency, for instance, an unexpected and severe surgery. To this end, not only do we control for health status, but we have also dichotomized health expenditure into two components: outpatient health expenditure and hospital health expenditure. This likely did not entirely reflect the difference in predictable and unpredictable spending, however, it does have the merit of looking more closely at whether remittances affect all of the expenditure components in the same way. Households may ask migrants for regular help in dealing with a chronic illness. In addition, health care needs within the household in the country of origin may be the purpose for the original migration and for remitting. As a consequence, a naïve estimate of the impact of remittances on access to care may suffer from endogeneity bias, as is discussed by Amuedo-Dorantes and Pozo, (2011) and Kan, (2016). The motives of remitting are well documented since the 1980s and summarized by Rapoport and Docquier (2006). The motives are various across migrants and often numerous in an individual migrant. Motives can be both individualistic (pure altruism, exchange of service, strategic) and resulting from a familial arrangement, as is suggested in the rich literature that has focused on informal mutual insurance and familial investment (Katz and Stark, 1986; Stark and Lucas, 1988; Stark, 1995; Shaw, 1988; Lambert, 1994; Schrieder and Knerr, 2000). We might predict that health shocks would affect the receipt of remittances in cases where the "altruistic", “exchange of service” or "insurance" models apply or dominate others. Rapoport and Docquier (2006) and Cox et al. (1998) note that transfers are often targeted to the unemployed and sick people and this is in line with the altruistic, exchange of services and insurance models. Moreover, catastrophic healthcare expenditures can be considered as one of the probable, adverse short-run shocks in recipients’ income that affect the receipt of remittances (Ambrosius and Cuecuecha 2013). In the case of altruism, the migrant helps the household to cope with (potentially catastrophic)