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

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  • Hui He

    ()
    (Shanghai University of Finance and Economics)

  • Kevin x.d. Huang

    ()
    (Vanderbilt University)

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.

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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 13-00005.

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Date of creation: 25 Mar 2013
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Handle: RePEc:van:wpaper:vuecon-sub-13-00005

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Taxation; Time allocation; Health expenditure; Macroeconomics; General equilibrium;

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  9. Juergen Jung & Chung Tran, 2010. "Medical Consumption Over the Life Cycle: Facts from a U.S. Medical Expenditure Panel Survey," Discussion Papers 2010-08, School of Economics, The University of New South Wales.
  10. Juergen Jung & Chung Tran, 2008. "The Macroeconomics of Health Savings Accounts," Caepr Working Papers 2007-023, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
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  18. Kenkel, D.S., 1989. "Should You Eat Breakfast? Estimates From Health Production Functions," Papers 9-90-8, Pennsylvania State - Department of Economics.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why Americans spend so much on health: they work themselves sick
    by Economic Logician in Economic Logic on 2013-04-25 14:53:00
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Cited by:
  1. Elgin, Ceyhun & Yucel, Emekcan, 2013. "Determinants of the weight for leisure in preferences," Economics Discussion Papers 2013-57, Kiel Institute for the World Economy.

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