CO2 Emissions, Health Expenditures and Economic Growth in Iran: Application of Dynamic Simultaneous Equation Models

Introduction: Studies on the causal dynamics between the environment, health expenditures, and economic growth have recently started in the economics literature for both developing and developed countries. Methods: This study examines the causal relationship between CO2 emissions, health expenditures, and economic growth, using dynamic simultaneous equation models for Iran over the period 1972–2012. Results: Our empirical results show that there is a bidirectional relationship of causality between CO2 emissions and economic growth. There is also a unidirectional relationship of causality from health expenditures to economic growth. The positive bidirectional causality relationship between CO2 emissions and economic growth will be very important for environmental quality over the next few years in Iran. Conclusion: It is clear that the government would like to increase economic growth over the period of the next Five-Year Development Plan. It seems that policymakers must examine the requirements for investment to promote environmental protection and increase technological transfers to reduce environmental damage.