The impact of firms’ adjustments on the indirect cost of illness

Michał Jakubczyk and Beata Koń
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Beata Koń: SGH Warsaw School of Economics

International Journal of Health Economics and Management, 2017, vol. 17, issue 3, No 6, 377-394

Abstract: Abstract Illness-related absenteeism reduces firms’ output, an effect referred to as indirect cost (IC) and often included in cost-of-illness or cost-effectiveness (of health technologies) studies. The companies may foresee this effect and modify hiring or contracting policies. We present a model allowing the estimation of IC with such adjustments. We show that the risk of illness does not change the general shape and properties of the (expected) marginal productivity function. We apply our model to several illustrative examples and show that firm’s adjustments impact IC in an ambiguous way, depending on detailed company/market characteristics: in some cases the company reduces the employment (further increasing IC), in another—the opposite happens. Contrary to previous findings, teamwork and shortfall penalties may reduce IC in some settings. Our analysis highlights that IC should be split into the result of companies preparing for and actually experiencing sick leaves.

Keywords: Absenteeism; Indirect cost; Teamwork; Output shortfall; Friction cost method; Societal perspective (search for similar items in EconPapers)
JEL-codes: D21 J21 J24 L23 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10754-017-9212-1

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