Thursday, April 25, 2013

Why Americans spend so much on health: they work themselves sick

If you compare Americans to Europeans, you can come up with a few differences: they are richer, work more, pay less in taxes, spend a lot more on health, but are less healthy. Could all these facts somehow be related?

Yes, according to Hui He and Kevin Huang, who use a dynamic general equilibrium model to study the impact of labor income taxes on the labor supply and health outcomes. The resulting story they can tell follows essentially these lines: First, to be more likely to be healthy, you need a good amount of leisure, or not be overworked (which may explain why I have been sick the last few days). But if labor income tax is low, you tend to want to work more. This diminishes your health, which you compensate by buying more health services, which you can afford thanks to higher income. Due to high demand for these services, they also become more expensive. In the end, Americans end up with an outcome where they have more stuff to consume which they trade off with paying more for health services, enjoying lower health and less leisure. All this because of the labor income taxes. Whether they are better off is a matter of individual taste. I could certainly need a bit more leisure about now.

1 comment:

Elizab2 said...

A few other explanations about why Americans spend more on health :
1/-their food industry is overruled by the giant food company using GMO (Genetically Modified Organism)to a much greater scale than Europe. Scientists have proved that it has some ill effects on people's health and well-being. (nicely illustrated by the film "Supersize me".
2/-The food shops are open 24hours a day (ultra liberal economy) to encourage people not only to buy but all the time...This situation will undoubtedly have side effects on the digestion system (working all the time)
3/- the combination of these 2 situations has produced a society of overweight and obese people who then have to control or counteract the negative effects of their diet on their health...
We are beginning to see this trend appearing in some European countries like in France. Will European be wide enough not to follow blindly the American Way to unhealthy living???