The health-maximizing level of labor supply: a macroeconomic perspective on the American Health Puzzle

Tanguy Le Fur and Alain Trannoy
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Tanguy Le Fur: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Alain Trannoy: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper provides a macroeconomic explanation for the United States suffering from a health disadvantage relative to other rich European countries despite spending much more on health care. We introduce health capital à la Grossman in the neoclassical growth model and assume that its rate of depreciation increases with labor supply. The steady-state share of GDP devoted to health expenditure increases with labor supply, but the relationship between the health capital stock and the number of hours worked is hump-shaped, meaning that there is a country-specific health-maximizing level. We calibrate the model to the United States and assess how much of this "American Health Puzzle" can be explained by the greater number of hours Americans work. Higher labor supply in the US accounts for 2 to 3 percentage points in extra health expenditure as a share of GDP and between 10% and one-third of the American health disadvantage.

Keywords: Working Time; Health Capital; Health Expenditure; Health-Maximizing Level of Labor Supply; American Health Puzzle. (search for similar items in EconPapers)
Date: 2024
Note: View the original document on HAL open archive server: https://hal.science/hal-04819199v1
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Published in Journal of Population Economics, 2024, 37, pp.73. ⟨10.1007/s00148-024-01051-6⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04819199

DOI: 10.1007/s00148-024-01051-6

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