al. 2001). Tales of hardship caused by out-of-pocket health care payments abound, and survey data appear to be consistent with this. In 1998, 7% of an average Vietnamese household’s total consumption was absorbed by health care spending (World_Bank, SIDA et al. 2001), and in the same year one-fifth of the population spent in excess of 20% of their non-food consumption on health care (Wagstaff and van Doorslaer 2003). In 1998, a single visit to a public hospital by someone from the bottom quintile cost the equivalent of 22% of their _annual_ non-food consumption (World_Bank, SIDA et al. 2001).

During the period in question, the government had three broad measures to reduce the cost of health care at the point of use. First, in 1994 it assumed the responsibility of paying employees in commune health centers, which in the pre-reform system had been the responsibility of communes (Glewwe 2003). Fees to commune health centers were as a result of this change supposed to be non-existent, and in practice the vast majority of people (82% according to one estimate) did not pay fees for commune health center visits in this period (World_Bank, SIDA et al. 2001). Second, a patchwork system of fee exemptions was developed, oriented almost exclusively towards the cost of hospital care. This was intended to be targeted towards the poor. However, in practice the better off have benefited almost as much as the poor, though the targeting appears to have improved between 1993 and 1998 (World_Bank, SIDA et al. 2001). Third, the government introduced a health insurance scheme in 1993, known initially as Vietnam Health Insurance (VHI). Civil servants, state enterprise workers, the military and Communist party officials are all covered at the government’s expense, and private firms with more than 10 employees were and still are required to enroll their workers. A voluntary component of the program exists, but official records show that voluntary enrolment has remained very low to date, and that those enrolled voluntarily tend to be school children who are typically enrolled en masse by their school, with the children’s parents paying the cost of the contribution. Coverage is much less generous for the voluntarily enrolled. Insurance coverage is concentrated fairly heavily among the better off.

In addition—subject to the policies outlined in the previous paragraph—to making outof-pocket medical expenditures more sensitive to health shocks, the _Doi Moi_ reforms are also likely to have raised the impact of health shocks on household income. The reforms aimed explicitly at replacing the planned economy by a regulated market economy. The decollectivization of agriculture made for a far closer link between a household’s income and its agricultural output. In industry, state-owned enterprises (SOEs) were either downsized or closed, with a third of SOE employees losing their job between 1989 and 1992 (Glewwe 2003). The private sector grew rapidly to fill the void, but the likely effect of these changes is that the link between a worker’s wages and his or her productivity-related characteristics will have increased. It is known, in fact, that the returns to schooling in Vietnam’s formal wage sector doubled between 1993 and 1998 (Gallup 2003), and it seems likely that the _Doi Moi_ reforms will have increased the returns to other dimensions of human capital, including health.

# <u>Methods</u>

Our interest is in assessing the impacts of (logarithmic) changes in health, Δ ln _h_ , on logarithmic changes in income, Δ ln _Y_ , medical consumption, Δ ln _M_ , and non-medical consumption, Δ ln _C_ . We use a fixed-effects specification similar to that used by Gertler and 2