Investigating the Role of Households’ Health Care Expenditures on the Iranian Households’ Welfare Using DSGE Framework

Document Type : Original Research


Assistant Professor, Department of Economics, Faculty of Management and Humanities, Chabahar Maritime University, Chabahar, Iran


Nowadays, the study of the share of households' health expenditures in their total consumption expenditures and its impact on the well-being of households and society has become an important issue as it is applied in policy and planning by government officials. This paper aims to examine the impact of changes in the share of health expenditures in the basket of total household consumption expenditures and to show that small changes in the variable have significant effects on consumption, desirability, and, consequently, the well-being of society. The results of this modelling suggest that a decrease in the share of household health expenditures leads to an increase in other household expenditures and, consequently, increases household welfare by an increasing utility. The reason for this is that by increasing its health and medical expenditures, the household must reduce its consumption of other goods, which decreases its total utility. It should be noted that this decrease is due to the fact that households are less inclined to spend a larger share of their total consumption expenditure on health services. An increase in the share of households' health expenditures in their total expenditures leads to a decrease in welfare, and a decrease in this share increases household welfare. However, factors such as the inefficiency of the insurance system, poor health system monitoring, and problems in accessing and using health services can have a major impact on households' acceptance, desire, and use of health services and should be considered a serious problem.


Main Subjects


©2022 The author(s). This is an open access article distributed under the terms of the Creative Commons Attribution (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, as long as the original authors and source are cited. No permission is required from the authors or the publishers.

Bolin, K., Jacobson, L. & Lindgren, B. (2001). The family as the health producer—when spouses are Nash bargainers. Journal of health economics,20(3), 349-62.
Cantarero, D. (2005). Decentralization and health care expenditure: the Spanish case. Applied Economics Letters,12(15), 963-6. https://DOI:  10.1016/s0167-6296(01)00135-7. PMID: 12022269. https://DOI: org/10.1080/13504850500377926.
Chou, W.L. (2007). Explaining China's regional health expenditures using LM-type unit root tests. Journal of Health Economics, 26(4),682-98. https://DOI: org/10.1016/j.jhealeco.2006.12.002. Epub 2007 Jan 12. PMID: 17222930.
Di Matteo, L. (2003). The income elasticity of health care spending. The European Journal of health economics,4(1), 9-20. https://DOI: org/10.1007/s10198-002-0141-6. PMID: 15609165.
Giammanco, M. & Gitto, L. (2019). Health expenditure and FDI in Europe. Economic Analysis and Policy, 62:255-67. https://DOI: org/10.1016/j.eap.2019.04.001.
Izadi, H.R. (2021) Investigating the Role of Financial Sanctions in Utility Function and Their Impact on Household Behavior DLSU Business & Economics Review, 31(1), 132-141.
Izadi, H. R. (2018). The Role of Tendency of Government Preference in an Optimal Fiscal Policy Model in the Presence of Agent Heterogeneity in A DSGE Framework. Quarterly Journal of Economical Modelling, 4(44), 73-96.
Izadi, H. R. & Marzban, H. (2016). Designing, Investigation and Comparison of The Factors of Stationarity of Dynamic Stochastic General Equilibrium Models in Iran Economy. Quarterly Journal of Economic Research and Policies, 24(2), 195-216.
Izadi, H. R. & Marzban, H. (2019). The Role of Productivity Growth Changes in Determining Optimal Monetary and Fiscal Policies from the Ramsey Problem. Quarterly Journal of Quantitative Economics, 2(16), 31-71. https://DOI: org/10.22055/jqe.2019.26016.1885.
Izadi, H. R. & Sayareh, S. (2019). Investigating the Role of Labor Division into Internal and External Sectors in the Iranian Economy within the Dynamic Stochastic General Equilibrium Model Framework. Quarterly Journal of Econometric Modelling, 4(3), 73-96. https://DOI: org/ 10.22075/jem.2019.18181.1339.
Marzban, H., Dehghan Shabani, Z., Rostamzadeh, P. & Izadi, H. R. (2017). The Welfare Computation under Different Fiscal Policies in an Optimal Monetary and Fiscal Policy Model Framework. Quarterly Journal of Economical Modelling, 3(5), 25-51.
Marzban, H., Dehghan Shabani, Z., Rostamzadeh, P. & Izadi, H. R. (2018). Optimal Fiscal and Monetary Policy by Applying the Ramsey Problem. The Economic Research, 18(3), 27-56.
Mehrara, M. & Fazaeli, A. (2010). Health Finance Equity in Iran: An Analysis of Household Survey Data (2003-2007). Journal of health administration, 13(40), 51-61.
Meyerhoefer, C.D., Sahn, D.E. & Younger, S.D. (2007). The joint demand for health care, leisure, and commodities: Implications for health care finance and access in Vietnam. The Journal of Development Studies, 43(8), 1475-500. https://DOI: org/10.1080/00220380701611527.
Parker, S.W. & Wong, R. (1997). Household income and health care expenditures in Mexico. Health Policy, 40(3), 237-55. https://DOI: org/10.1016/s0168-8510(97)00011-0. PMID: 10168755.
Phua, K.H. (2018). Governance Issues in Health Financing. Reference Module in Biomedical Sciences, 18, 330-41. https://DOI: org/10.1016/B978-0-12-801238-3.66207-4.
Rous, J.J & Hotchkiss, D.R. (2003). Estimation of the determinants of household health care expenditures in Nepal with controls for endogenous illness and provider choice. Health Economics,12(6), 431- 51. https://DOI: org/10.1002/hec.727. PMID: 12759914.
Sanwald, A. & Theurl, E. (2015). Out-of-pocket payments in the Austrian healthcare system – a distributional analysis. International Journal for Equity in Health, 14(94). https://DOI: 10.1186/s12939-015-0230-7. PMID: 26463468; PMCID: PMC4604770.
Waters, H. R., Anderson, G.F. & Mays, J. (2004). Measuring financial protection in health in the United States. Health policy, 69(3), 339-49. https://DOI: org/10.1016/j.healthpol.2004.01.003. PMID: 15276313.
Xu, K., Evans, D.B., Carrin, G., Aguilar-Rivera, A.M., Musgrove, P. & Evans, T. (2007). Protecting households from catastrophic health spending. Health Affairs,26(4),972-83. https://DOI: 10.1377/hlthaff.26.4.972. PMID: 17630440.
Zare, H., Trujillo, A.J., Leidman, E. & Buttorff, C. (2013). Income elasticity of health expenditures in Iran. Health policy and planning,28(6), 665-79. https://DOI: org/10.1093/heapol/czs106. Epub 2012 Nov 11. PMID: 23144230.