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Hui He and Kevin x.d. Huang
''Why Do Americans Spend So Much More on Health Care than Europeans?--A General Equilibrium Macroeconomic Analysis''
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.
Keywords: Taxation, Time allocation, Health expenditure, Macroeconomics, General equilibrium
JEL: E0 - Macroeconomics and Monetary Economics: General
H0 - Public Economics: General
Manuscript Received : Feb 21 2013 Manuscript Accepted : Mar 25 2013

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