Breaking the perverse health-debt cycle in Sri Lanka: policy options

Ramanie Samaratunge, Ajantha Sisira Kumara, Lakmal Abeysekera

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This paper proposes a finite mixture model to examine how health adversities influence indebtedness of Sri Lankan households. After accounting for unobserved heterogeneity, our empirical analysis reveals that households headed by ill-health members and those with hospitalization are inevitably more vulnerable to indebtedness. The ill-health status of other working-age members also creates milder effects on household indebtedness. We confirm that the health-debt cycle is more severe for urban households, compared to their rural counterparts. The study is testimony to re-emphasizing the role of government in providing much-needed financial protection to vulnerable households and implementing differentiated-policy packages for urban and rural sectors in order to effectively break the health-debt cycle.

Original languageEnglish
Pages (from-to)728-745
Number of pages18
JournalJournal of Policy Modeling
Issue number3
Publication statusPublished - May 2020


  • Household surveys
  • Ill-health
  • Indebtedness
  • Living sector
  • Unobserved-heterogeneity

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