Estimating the Health Care Demand for Iran

Background: When trying to estimate demand elasticity, it is important to firstobtain an appropriate estimation of the demand function. One of the best methodsfor estimating the demand for healthcare services that is part of the household costis the use of the almost ideal demand system (AIDS). The purpose of this studywas to making better decisions when estimating the demand elasticity forhealthcare services.Methods: This research is a descriptive-analytic study. The statistical populationof this study is the Iranian population for the years 1990 to 2011. The required datawere collected from the Central Bank of the Islamic Republic of Iran. In thisresearch, the demand for healthcare services was estimated using the AIDS modelby the method of estimating seemingly unrelated regressions (SUR).Results: According to the estimates, the income elasticity for the demand ofhealthcare services in the household budget is slightly larger than one and the selfpricedelasticity is close to one and the cross elasticity between the change in houseprices and the share of healthcare services is a negative value and close to zero andthe cross elasticity between food prices and the share of healthcare services ispositive and near zero and the cross elasticity between clothing prices and the shareof health care services in the household budget is zero.Conclusion: Since the income elasticity of demand for healthcare services isgreater than one, it is necessary for the government to increase the share of healthcare budget so that low-income groups can use these services. Furthermore, theprice elasticity of healthcare services is one; therefore, a steady rise in the price ofhealth care services cannot lead to a sharp decline in using these services forhouseholds.