Policy Analysis of the Impacts of Electricity Subsidy Removal on Producer Price Index in Private and Public Healthcare Sectors: A Structural Path Analysis Approach

Use of advanced technologies and electronic systems in health services increases the consumption of energy carriers especially electricity. Hence,health services are inevitably influenced by changes in electricity prices. Regarding the importance of health sector in Iran, investigating the effects of removing the electricity subsidy on health sector is crucial. Therefore, this study employs the Energy Social Accounting Matrix of 2006, in order to evaluate the effects of overall electricity price increases on producer price index in health sector. Moreover, the structural path analysis is applied to highlight the paths of impacts of one unit reduction in electricity subsidy on five subsectors of health sector. Findings show that the effects of such policy on producer price indices are higher in public health subsectors compared to private health subsectors. In other words, by cutting 10000 Rials of electricity subsidies, health services’ providers in public sector should spend additional 123 Rials on average. The corresponding figure in private health services is estimated by 138 Rials.