Informality and Protection from Health Shocks : Lessons from Yemen

The informal sector is generally believed to be more vulnerable to various risks due to limited access to social insurance, but little empirical evidence exists to support this statement. This paper examines the relationship between informality and protection from health risks in Yemen. The formal sector, when defined based on pension coverage, largely overlaps with public employment where the better educated, more experienced, and better informed tend to work. The results indicate that, even after accounting for socio-economic status, water supply and quality conditions, risky behavior patterns, and unobserved heterogeneity, formal sector households have better accessibility and affordability to health service. This may in part explain better health outcomes among formal households, although large heterogeneity across regions (urban/rural) exists. However, the role of the existing health insurance is found to be unclear. The findings reconfirm the importance of policies that promote universal access to health service and a risk pooling avenue delinked from employment types as well as healthy living conditions and lifestyles.