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Labor Market Costs of Illness: Prevalence Matters

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  • Thomas DeLeire
  • Willard Manning

Abstract

We present a model of the labor market effects of health impairments. In particular, we describe several economic models in which health affects worker productivity and the demand for and supply of market labor services. These models provide a framework for estimating the social cost of prevalent health impairments—a necessary step in conducting cost-benefit analyses and in determining the cost-effectiveness of potential health interventions from a broader social perspective. Our approach suggests that several measures used in the literature provide an incomplete and systematically biased assessment of the economic impact of health impairment or of the treatment of illness and impairment. The problem arises because of the reliance on an approximation at the firm level and from the bias from the neglect of the effect of impairment in shifting the labor market equilibrium. If the illness is prevalent, the effects on labor market equilibrium wage rates could be substantial. In addition, many analyses also ignore the effects of illness on producers’ surplus.

Suggested Citation

  • Thomas DeLeire & Willard Manning, 2003. "Labor Market Costs of Illness: Prevalence Matters," Working Papers 0314, Harris School of Public Policy Studies, University of Chicago.
    • Handle: RePEc:har:wpaper:0314
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    References listed on IDEAS

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    Cited by:

    1. Andersen, Signe Hald, 2010. "The cost of sickness: On the effect of the duration of sick leave on post-sick leave earnings," Social Science & Medicine, Elsevier, vol. 70(10), pages 1581-1589, May.
    2. John A. Nyman, 2012. "Productivity Costs Revisited: Toward A New Us Policy," Health Economics, John Wiley & Sons, Ltd., vol. 21(12), pages 1387-1401, December.
    3. Allison Larg & John Moss, 2011. "Cost-of-Illness Studies," PharmacoEconomics, Springer, vol. 29(8), pages 653-671, August.
    4. Julie Donohue & Harold Pincus, 2007. "Reducing the Societal Burden of Depression," PharmacoEconomics, Springer, vol. 25(1), pages 7-24, January.
    5. Oliver Fritz & Peter Mayerhofer & Reinhard Haller & Gerhard Streicher & Florian Bachner & Herwig Ostermann, 2013. "Die regionalwirtschaftlichen Effekte der österreichischen Krankenanstalten," WIFO Studies, WIFO, number 46672, April.
    6. Andrén, Daniela & Palmer, Edward, 2004. "The Effect of Past Sickness on Current Earnings in Sweden," Working Papers in Economics 138, University of Gothenburg, Department of Economics.
    7. Michal Jakubczyk & Beata Kon, 2016. "The impact of firms' expectations & adjustments on the productivity cost of illness," KAE Working Papers 2016-008, Warsaw School of Economics, Collegium of Economic Analysis.
    8. Ebere Akobundu & Jing Ju & Lisa Blatt & C. Mullins, 2006. "Cost-of-Illness Studies," PharmacoEconomics, Springer, vol. 24(9), pages 869-890, September.
    9. Michał Jakubczyk & Beata Koń, 2017. "The impact of firms’ adjustments on the indirect cost of illness," International Journal of Health Economics and Management, Springer, vol. 17(3), pages 377-394, September.
    10. Ochi, John & Madaki, Musa & Murtala, Nasiru, 2015. "Economic and Social Linkages Between Malaria Illness and Crop Production in Yobe State, Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 212587, International Association of Agricultural Economists.
    11. John Mullahy, 2015. "In Memoriam: Willard G. Manning, 1946‐2014," Health Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 253-257, March.
    12. D Andren & E Palmer, 2008. "The Effect of Sickness History on Earnings in Sweden," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 1-24, March.
    13. Kim, Namhoon & Mountain, Travis P., 2018. "Do we consider paid sick leave when deciding to get vaccinated?," Social Science & Medicine, Elsevier, vol. 198(C), pages 1-6.

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