The Effect of Education on Iranian Households Health Care Spending

اقتصاد و توسعه منطقه ای

Article 3, Volume 26, Issue 18, June 2020, Pages 41-74   

Document Type: مقالات پژوهشی

DOI: 10.22067/erd.v26i18.85044

Authors

Mohsen Mehrara¹; Maryam Farshchi²

¹Professor of economics, University of Tehran

²Ph.D. Student of Economics, University of Tehran

Abstract

Introduction
 Providing health is one of the most important economic necessities to ensure a healthy and efficient employee. Improving households’ health leads to human development and increases labor productivity. Education as one of the important development factors causes increased job skills, productivity, and economic growth. Both health and education affect economic development, so in this study, the relationship between these two is examined. In recent decades various theoretical and practical studies have been done and a wide range of variables, including household education, have been introduced as factors that affecting household health.
Theoretical framework
 Grossman (1972) study on health demand extends the function of household production for health and assumes that households combine inputs of medical care and time to produce health. Education as an environmental variable increases the efficiency in health production. In this context, the contribution of education to enhanced efficiency in health production has several implications for health care spending. For example, more highly educated individuals and families can economize on their use of medical care, and correspondingly, their spending to produce or restore a given level of health. However, since increased education enhances the returns to healthy days, individuals and families have an incentive to increase their investments in health and potentially, their spending on medical care. Finally, in deciding between inputs of time and medical care in health production, more highly educated households with higher opportunity costs of time and who are likely to have health insurance may seek to economize on inputs of time in health production and as a result, increase their use of medical care and incur additional health care spending.
 
Methodology
 The association between households’ education and family health care spending in urban families is examined by using data from 2014 to 2017 Iranian survey of household income and expenses. For this purpose, the quantile regression estimation and Melly (2006) decomposition method have been used. In addition, to measure inequality, health care costs, and total household expenditures in different quantiles are compared. Health costs are also analyzed separately by couples' education level.
Results and Discussion
 The results show, by holding family income and insurance status constant, the effect of higher education on health spending in most quantiles is positive. In particular, this effect is much stronger for spouses with higher education as well as for higher-health care expenditure quantiles. For example, in the high quantile of health care expenditure, Ph.D. education increases 97 percent of households’ health spending than illiterate households. This effect in the lower quantiles of health care expenditure is 0.22. The results of the Melly decomposition method show that the effect of education on health costs (from the channel of variables such as income and insurance) known as the characteristic effect was strong and in the low quantiles of the health care expenditure are even higher than high quantiles.
The results of the Gini index and comparing different quantiles show that inequality of health costs (out of pocket) is more than the inequality of total costs. For example, the total cost of 0.75 quantile is about 1.7 times the 0.50 quantile, while this ratio is 4.5 times the health care costs. The effect of insurance on the low quantiles of health costs has strong and significant. Therefore, the moral hazard for this group of households (who are probability looking for prescription drugs expenses) is confirmed. But there was no evidence of moral hazard for high quantities of health care costs (possibly corresponding to hospital and emergency costs). In addition, the reducing effect of household employment and sport activities in most health costs quantiles are obvious. Studies have shown that health plan has been successful in lower quintiles of health care costs but it has had little effect on reducing the cost of health in high quintiles and paying out of pocket.
Conclusion and Suggestions
 The development of managed care along with increased cost-effective care, especially in high health-care quantiles, is beneficial for these groups in reducing out-of-pocket costs. Techniques that benefit from the interaction of education and health can be planned and implemented according to the direct effect of education on the health of households as well as its indirect effect through the insurance and income channel so that the mentioned strategies lead to the promotion of community health. Furthermore, the results indicate that increased education leads to increased health expenditures and improved household health. As a result, by providing more opportunities to continue education, especially for undergraduate study groups, which are mostly in the low-income group, we will see the optimal allocation of resources for community health and human development.
 

Keywords

Health Expenditures; Education; Iranian Urban Households; Quantile regression; Blaise Melly decomposition

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