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

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

Keywords:

CO2 emissions , Health expenditures , Economic growth , Dynamic simultaneous equation models , GMM