Optimum Health Expenditure, Value of a Statistical Life and Health Capital in Iran

Increasing income levels in recent decades have led to an increase in the health share of GDP, which in turn has led to enhanced health and reduced mortality rates. The monetary value of mortality rate reduction leads to the concept of Value of a Statistical Life that this study calculates and examines its dynamics for 19 age cohorts after eliminating the shortcomings of the Hall and Jones (2007) model and utilizing a dynamic planning approach (in a life cycle model). After calculating the statistical value of life, Grossman's (1972) health capital is established and calculated in Hall and Jones's (2007) theoretical framework. Results show that improving the health status of 10-14 year old individuals has the highest monetary value compared to other age groups. Also, the monetary value of utility resulting from improved health declines with age, so that for over 65 years old individuals, the monetary value of improved health reaches to the level of the monetary value of utility derived from consumption. Infant health capital fluctuates between 2 and 15 million dollars throughout 1996-2015. The fluctuation of health capital and the Value of a Statistical Life depend s on the fluctuation of per capita income, which confirms the very tight relationship between income, consumption, utility, and monetary value of life.