Determinants of Life Expectancy at Birth in Iran: A modified Grossman Health Production Function

Health as a prerequisite to perform other activities is considered as both consumption and capital commodity. Views on health production may differ. Sometimes, health is assumed as natural endowment, at times, it is generated by the personal efforts, and sometimes physicians and other health providers provide it. This paper aims to identify the factors affecting the production of health. To analyze the determinants of health production, we focus on life expectancy at birth in Iran over the period 1980-2012, as a dependent variable; and take per capita income, immunization rate and share of expenditure on education( as percent of GDP) as explanatory variables. Then, we estimate the determinants of life expectancy using Johansen-Juselius cointegration method for the long-run and error correction model for the short-run in the Eviews.8 software environment. In the long-run, the elasticity of life expectancy with respect to per capita income is about 0.12. In addition, the elasticities of life expectancy with regard to the rate of vaccination against illnesses and education level are 0.35 and 0.13, respectively. According to error correction model, the coefficient of error correction term (ECT) is estimated at -0.022, which shows that the 2.2% of disequilibrium in life expectancy is adjusted in each period and is approached to its long-run equilibrium. the healthier and longer life require policy-makers to adopt more efficient policies in order to raise purchasing power, to enhance overall education level and to invest on immunization people against infectious and communicable diseases.