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

Author

Listed:
  • 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.

Suggested Citation

  • Hui He & Kevin x.d. Huang, 2013. "Why Do Americans Spend So Much More on Health Care than Europeans?--A General Equilibrium Macroeconomic Analysis," Vanderbilt University Department of Economics Working Papers 13-00005, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:vuecon-sub-13-00005
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    References listed on IDEAS

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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 19:53:00

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    Cited by:

    1. Yonghong An & Kai Zhao & Rong Zhou, 2016. "Health spending and public pension: evidence from panel data," Applied Economics, Taylor & Francis Journals, vol. 48(11), pages 987-1004, March.
    2. Elgin, Ceyhun & Yucel, Emekcan, 2014. "Determinants of the weight for leisure in preferences," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-26.

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    More about this item

    Keywords

    Taxation; Time allocation; Health expenditure; Macroeconomics; General equilibrium;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • H0 - Public Economics - - General

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    This paper has been announced in the following NEP Reports:

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