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| Kevin x.d. Huang and Hui He |
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| ''Why Do Americans Spend So Much More on Health Care than Europeans?'' |
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| 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. |
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| Keywords: Taxation; Time allocation; Health expenditure; Macroeconomics; General equilibrium |
JEL: E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General |
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| Manuscript Received : Dec 17 2013 | | Manuscript Accepted : Dec 23 2013 |
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