Abstract
Low and volatile incomes,coupled with absent or poorly developed,risk-sharing institutions make,consumption,insurance,an important,issue in low -income countries like Ethiopia. Based on the theory of full insurance and two years panel data, this study investigates the impact of illness on consumption,of rural households,in rural Ethiopia and the capacity of inter and,intra risk sharing arrangements,in insuring consumption,against illness. Two worrisome findings have emerged from the empirical analysis. First, illness of the household head has significant negative impact,on the growth,rate of purchased and non-food non-

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