Analyzing the Asymmetric Impact of Air Pollution on Per Capita Health Expenditure in Iran

Air pollution from different channels leads to weakening of health and increasing demand for health care, and as a result, increasing per capita health expenditure. On the other hand, it is possible that the impact of air pollution on health costs is asymmetric; In this sense, the effectiveness of health costs from increasing and decreasing the air pollution is not the same. Based on this, the main purpose of this study is to experimentally estimate the asymmetric effect of air pollution index on per capita health expenditure in Iran.

The present descriptive-analytical and applied study using the time series data during the period of 1989-2020, investigated the short-term and long-term effects of positive and negative air pollution shocks, per capita income, dependency burden, and urbanization on per capita health expenditure. The data used were also collected from the Central bank of Islamic Republic of Iran database and World Development Indicators belonging to the World Bank. Also, the model was 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 in the short and long term, the effect of positive air pollution index shocks on the increase of health expenditure per capita is greater than the effect of its negative shocks on the decrease of health expenditure per capita (confirmation of asymmetric effect). With a one percent increase in CO2 emissions, in the long and short term, per capita health expenditure will increase by about 0.18 and 0.04 percent, respectively. On the other hand, with a one percent reduction in CO2 emissions, in the long and short term, per capita health expenditure will decrease by 0.06 and 0.01 percent, respectively.

Considering that the effect of increasing shocks of air pollution on health costs is much greater than the effect of decreasing shocks, adopting policies and strategies to prevent the increase of air pollution emissions in the current period can help reduce future additional per capita costs in the health sector.