Health Expenditure and Its Human Capital Determinants in Iran

Background: Human capital is an effective variable on the health condition of a society and its changing changes health expenditure as the proxy of health. This study aimed to investigate the relationship between human capital determinants and health expenditure. Methods: An empirical model was used with 7 variables included gender parity (GPI) index, literacy rate, life expectancy at birth, GDP per capita, physician per capita, and hospital’s bed as the independent variable and health expenditure as depended variable. After unit root test of data by using Zivot-Andrews method, the model was estimated by ordinary least square (OLS) method. Result: GPI had the negative and significant impact on health expenditure. Literacy had the positive and significant impact on depended variable. In addition, GDP per capita and life expectancy had positive and significant on health expenditure. Hospital bed and physician per capita did not have the significant relationship with health expenditure. The value of R-squared and Durbin-Watson statistic were 0.99 and 1.95 respectively, which showed good model fit. Conclusion: literacy rate and GPI index as the proxy of human capital had the different impact on health expenditure. The first had positive and the latter had negative. GDP per capita had the positive impact that showed health was a normal good.