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Substituting Leisure for Health Expenditure: A General Equilibrium-Based Empirical Investigation

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  • Kevin x.d. Huang

    ()
    (Vanderbilt University)

  • Hui He

    ()
    (Shanghai University of Finance and Economics)

  • Sheng-ti Hung

    ()
    (University of Hawai''i at Manoa)

Abstract

We develop a general equilibrium macroeconomic model with endogenous health accumulation, and we use the model's equilibrium condition to estimate the elasticity of substitution between medical care and leisure time in maintaining health, based on a cross-country panel dataset. Our econometric estimates imply that increasing health-enhancing leisure time may substantially reduce the nation's medical expenditure and help resolve its pressing fiscal uncertainty. Our study highlights the importance of several current nationwide campaigns aimed at improving national health status, from not only health but macroeconomic perspectives. Our study also provides a guidance to a growing macro-health literature in modeling health production.

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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 13-00020.

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Date of creation: 23 Dec 2013
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Handle: RePEc:van:wpaper:vuecon-sub-13-00020

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

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Keywords: general equilibrium; macro-health; health care; leisure time; elasticity of substitution; fiscal uncertainty;

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  1. Ohanian, Lee & Raffo, Andrea & Rogerson, Richard, 2008. "Long-term changes in labor supply and taxes: Evidence from OECD countries, 1956-2004," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(8), pages 1353-1362, November.
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  4. William Comanor & H. Frech & Richard Miller, 2006. "Is the United States an outlier in health care and health outcomes? A preliminary analysis," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 6(1), pages 3-23, March.
  5. Timothy Halliday & Hui He & Hao Zhang, 2012. "Health Investment over the Life-Cycle," Working Papers 201210, University of Hawaii at Manoa, Department of Economics.
  6. S. Balia & AM. Jones, 2004. "Mortality, Lifestyle and Socio-Economic Status," Working Paper CRENoS 200416, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  7. Juergen Jung & Chung Tran, 2010. "Medical Consumption Over the Life Cycle: Facts from a U.S. Medical Expenditure Panel Survey," Discussion Papers, School of Economics, The University of New South Wales 2010-08, School of Economics, The University of New South Wales.
  8. Zhigang Feng, 2009. "Macroeconomic Consequences of Alternative Reforms to the Health Insurance System in the U.S," Working Papers, University of Miami, Department of Economics 0908, University of Miami, Department of Economics.
  9. Richard W. Evans & Laurence J. Kotlikoff & Kerk L. Phillips, 2012. "Game Over: Simulating Unsustainable Fiscal Policy," NBER Working Papers 17917, National Bureau of Economic Research, Inc.
  10. Kenkel, D.S., 1989. "Should You Eat Breakfast? Estimates From Health Production Functions," Papers, Pennsylvania State - Department of Economics 9-90-8, Pennsylvania State - Department of Economics.
  11. Zhao, Kai, 2011. "Social security and the rise in health spending: a macroeconomic analysis," MPRA Paper 34203, University Library of Munich, Germany.
  12. Contoyannis, Paul & Jones, Andrew M., 2004. "Socio-economic status, health and lifestyle," Journal of Health Economics, Elsevier, vol. 23(5), pages 965-995, September.
  13. van Doorslaer, Eddy & Wagstaff, Adam & Bleichrodt, Han & Calonge, Samuel & Gerdtham, Ulf-G. & Gerfin, Michael & Geurts, Jose & Gross, Lorna & Hakkinen, Unto & Leu, Robert E., 1997. "Income-related inequalities in health: some international comparisons," Journal of Health Economics, Elsevier, vol. 16(1), pages 93-112, February.
  14. Robert E. Hall & Charles I. Jones, 2005. "The value of life and the rise in health spending," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco.
  15. David Card & Carlos Dobkin & Nicole Maestas, 2008. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare," American Economic Review, American Economic Association, vol. 98(5), pages 2242-58, December.
  16. Michael Insler, 2013. "The Health Consequences of Retirement," Departmental Working Papers, United States Naval Academy Department of Economics 43, United States Naval Academy Department of Economics.
  17. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  18. Sickles, Robin C & Yazbeck, Abdo, 1998. "On the Dynamics of Demand for Leisure and the Production of Health," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 16(2), pages 187-97, April.
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Cited by:
  1. Kevin X. D. Huang & Hui He, 2013. "Why Do Americans Spend So Much More on Health Care than Europeans?," Vanderbilt University Department of Economics Working Papers 13-00021, Vanderbilt University Department of Economics.

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