The Effect of Positive and Negative Public Health Expenditure Shocks during Business Cycles on Health Status in Iran

The impact of positive and negative shocks or the asymmetric impact of public health expenditures during periods of recession and boom (business cycles) on health status is of particular importance in terms of making appropriate decisions in the field of controlling the vulnerability of the lower classes of society in these periods. Based on this, the main purpose of this study is to estimate the asymmetric effect of public health expenditures on the health status in Iran during periods of recession and boom.

The present descriptive-analytical and applied study using the time series data during the period of 1979-2020, investigated the long-term effects of positive and negative public health expenditures shocks during business cycles, per capita income and physician per capita on the death rate of children under 5 years and life expectancy. Filtering approach and three filters HP, BK and CF have been used to identify business cycles. Also, the models were estimated in the form of a regression model using the Non-linear Auto-Regressive Distributed Lags (NARDL) method in Eviews 12.0 software.

The results show that the public health expenditure had a pro-cyclical behavior during the period under review. In the long-term, the effect of negative public health expenditure shocks during business cycles on weakening health indicators is greater than the effect of its positive shocks on strengthening health indicators (confirmation of asymmetric effect). Also, the impact of positive and negative shocks on public health expenditures during periods of economic recession is greater than during periods of economic boom. With a 1% decrease in public health expenditures during periods of economic recession, the death rate of children under 5 years increases by 0.17% and the life expectancy decreases by 0.13%.

Based on the results of this research, it is recommended to increase public health expenditures during periods of economic recession in order to reduce the vulnerability of the lower classes of society. But, considering the pro-cyclical behavior of public health expenditures, it is necessary to adopt policies and solutions to reduce the intensity of this behavior.