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Kevin x.d. Huang and Hui He
 
''Why Do Americans Spend So Much More on Health Care than Europeans?''
 
 
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.
 
 
Keywords: Taxation; Relative health care price; Time allocation; Health care expenditure; Macroeconomics
JEL: E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
H2 - Taxation, Subsidies, and Revenue: General
 
Manuscript Received : Apr 07 2015 Manuscript Accepted : Apr 08 2015

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