Why Do Americans Spend So Much More on Health Care than Europeans?--A General Equilibrium Macroeconomic Analysis

Hui He () and Kevin Huang ()

No 13-00005, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: Empirical evidence suggests that both leisure time and medical care are important for maintaining health. We develop a general equilibrium macroeconomic model in which taxation is a key determinant of the composition of these two inputs in the endogenous accumulation of health capital. In our model, higher taxes lead to using relatively more leisure time and less medical care in maintaining health. We find that the difference in taxation can account for a large fraction of the difference in health expenditure-GDP ratio and almost all of the difference in time input for health production between the US and Europe.

Keywords: Taxation; Time allocation; Health expenditure; Macroeconomics; General equilibrium (search for similar items in EconPapers)
JEL-codes: E0 H0 (search for similar items in EconPapers)
Date: 2013-03-25
New Economics Papers: this item is included in nep-dge, nep-hea and nep-mac
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:vuecon-sub-13-00005

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