Welfare and Economic Effects of Increasing Government Health Expenditures in Iran:A Social Accounting Matrix Approach

The health sector is one of the most important economic sectors in any society and has an interactive relationship with other sectors. Given the importance of the government involvement in the health sector, this study examined the economic and welfare implications of increasing the government healthcare expenditures in Iran. This applied research was conducted by utilizing the Social Accounting Matrix of the year 2011 prepared by the Iranian Parliament Research Center constructed based on the data such as the national accounts, the household budget survey of the year 2011, and updating of the I-O table of the year 2001. Estimates and data analysis were conducted using Excel 2013 software. The results showed that most of the demand for the government health sector is in the form of final demand (99%) and most of the payments are paid to employees (67%). Moreover, after implementing the study scenario, the total output increased by 0.95% and the welfare of urban and rural households increased by 0.933% and 0.89% while the changes in their social welfare were 0.93% and 0.87%, respectively. Because of its nature, the government health sector has a slight direct role in other economic sectors. However, high final demand and huge wage payments in this sector have caused that the increasing demand creates widespread effects on the economic production and welfare. However, the improved income of employees in this sector, which are mostly included in the high-income deciles, will worsen the distribution of income to the detriment of the lower deciles. Therefore, the government should provide supportive policies to remove this problem.