IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Why Do Americans Spend So Much More on Health Care than Europeans?

  • Kevin X. D. Huang


    (Vanderbilt University)

  • Hui He


    (Shanghai University of Finance and Economics)

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 difference in taxation between the US and Europe can account for a large fraction of their difference in health expenditure-GDP ratio and almost all of their difference in time input for health production.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 13-00021.

in new window

Date of creation: 23 Dec 2013
Date of revision:
Handle: RePEc:van:wpaper:vuecon-sub-13-00021
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2005. "Work and Leisure in the U. S. and Europe: Why so Different?," Harvard Institute of Economic Research Working Papers 2068, Harvard - Institute of Economic Research.
  2. Christopher J. Ruhm, 1996. "Are Recessions Good For Your Health?," NBER Working Papers 5570, National Bureau of Economic Research, Inc.
  3. Gerdtham, Ulf-G. & Jonsson, Bengt, 2000. "International comparisons of health expenditure: Theory, data and econometric analysis," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 1, pages 11-53 Elsevier.
  4. Motohiro Yogo, 2009. "Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing and Risky Assets," Working Papers, Center for Retirement Research at Boston College wp2009-3, Center for Retirement Research, revised Jan 2009.
  5. Davis, Steven J. & Henrekson, Magnus, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," Ratio Working Papers 57, The Ratio Institute.
  6. 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, vol. 16(2), pages 187-97, April.
  7. Sheng-Ti Hung & Kevin X.D. Huang & Hui He, 2013. "Substituting Leisure for Health Expenditure: A General Equilibrium-Based Empirical Investigation," 2013 Meeting Papers 1310, Society for Economic Dynamics.
  8. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-Term Changes in Labor Supply and Taxes: Evidence from OECD Countries, 1956-2004," NBER Working Papers 12786, National Bureau of Economic Research, Inc.
  9. Edward C. Prescott, 2004. "Why do Americans Work so Much More than Europeans?," NBER Working Papers 10316, National Bureau of Economic Research, Inc.
  10. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  11. Juergen Jung & Chung Tran, 2010. "The Macroeconomics of Health Savings Accounts," Working Papers 2010-12, Towson University, Department of Economics, revised May 2011.
  12. Fonseca, Raquel & Michaud, Pierre-Carl & Galama, Titus & Kapteyn, Arie, 2009. "On The Rise of Health Spending and Longevity," IZA Discussion Papers 4622, Institute for the Study of Labor (IZA).
  13. Zhao, Kai, 2014. "Social security and the rise in health spending," Journal of Monetary Economics, Elsevier, vol. 64(C), pages 21-37.
  14. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc.
  15. Hanming Fang & Alessandro Gavazza, 2010. "Dynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence," Working Papers 10-01, Duke University, Department of Economics.
  16. Richard Rogerson, 2007. "Structural Transformation and the Deterioration of European Labor Market Outcomes," NBER Working Papers 12889, National Bureau of Economic Research, Inc.
  17. Conny Olovsson, 2009. "Why Do Europeans Work So Little?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 39-61, 02.
  18. Michael Insler, 2013. "The Health Consequences of Retirement," Departmental Working Papers 43, United States Naval Academy Department of Economics.
  19. 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.
  20. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-82, August.
  21. Reuben Gronau, 1976. "Leisure, Home Production and Work--The Theory of The Allocation of Time Revisited," NBER Working Papers 0137, National Bureau of Economic Research, Inc.
  22. Kevin x.d. Huang & Hui He, 2015. "Why Do Americans Spend So Much More on Health Care than Europeans?," Vanderbilt University Department of Economics Working Papers 15-00003, Vanderbilt University Department of Economics.
  23. Zhigang Feng, 2009. "Macroeconomic Consequences of Alternative Reforms to the Health Insurance System in the U.S," Working Papers 0908, University of Miami, Department of Economics.
  24. Richard Rogerson, 2004. "Two Views on the Deterioration of European Labor Market Outcomes," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 447-455, 04/05.
  25. Robert E. Hall & Charles I. Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 39-72.
  26. repec:gdm:wpaper:5810 is not listed on IDEAS
  27. Chen, Kaiji & Imrohoroglu, Ayse & Imrohoroglu, Selahattin, 2009. "A quantitative assessment of the decline in the U.S. current account," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1135-1147, November.
  28. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June.
  29. Contoyannis, Paul & Jones, Andrew M., 2004. "Socio-economic status, health and lifestyle," Journal of Health Economics, Elsevier, vol. 23(5), pages 965-995, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:van:wpaper:vuecon-sub-13-00021. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.