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...

The US tax system currently provides an incentive for individuals to obtain medical insurance through their employers. This feature introduces a distortion which encourages households consume more medical services than they otherwise would, and likely results in the medical consumption taking up...