Testing the Hypothesis of Health Induced Demand in Iran Using the Bayesian Model Averaging

The number of physicians and hospital beds is one of the major factors affecting on health costs in the supply side, which is posited in the health economics issues called inductive demand hypothesis. According to this hypothesis, health care demand may be due to asymmetric information in health market, is influenced by the behavior of health suppliers. Therefore, the purpose of this study is to evaluation of inductive demand health hypothesis in Iran. This study using time series data from 1979-2013 is paid to study effect of per capita the number physicians and per capita the number hospital beds on per capita health sector costs. To this purpose, the Bayesian averaging approach has been used. Also, the statistical analyzes were performed using the R software. Estimation of 40000 regressions and Bayesian averaging of coefficients shows that the effect of physician's per capita variable on per capita health sector costs with a probability of 0.49 and a coefficient of 0.20 is non- fragile and strong. However, the impact of the per capita the number hospital beds on the per capita health sector costs is fragile and meaningless. The results of the research indicate that the health inductive demand hypothesis is confirmed for the number of physician, and rejected for the number of hospital beds; Therefore, policies and strategies that will lead to a reduction in physician induced demand in the country is essential