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

Author

Listed:
  • Michał Jakubczyk

    (SGH Warsaw School of Economics)

  • Beata Koń

    (SGH Warsaw School of Economics
    Ministry of Health)

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.

Suggested Citation

  • 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.
    • Handle: RePEc:kap:ijhcfe:v:17:y:2017:i:3:d:10.1007_s10754-017-9212-1
    DOI: 10.1007/s10754-017-9212-1
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    References listed on IDEAS

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    1. Thomas DeLeire & Willard Manning, 2004. "Labor market costs of illness: prevalence matters," Health Economics, John Wiley & Sons, Ltd., vol. 13(3), pages 239-250, March.
    2. Koopmanschap, Marc A. & Rutten, Frans F. H. & van Ineveld, B. Martin & van Roijen, Leona, 1995. "The friction cost method for measuring indirect costs of disease," Journal of Health Economics, Elsevier, vol. 14(2), pages 171-189, June.
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    5. Alex Bryson, 2013. "Do temporary agency workers affect workplace performance?," Journal of Productivity Analysis, Springer, vol. 39(2), pages 131-138, April.
    6. Krol, Marieke & Brouwer, Werner B.F. & Severens, Johan L. & Kaper, Janneke & Evers, Silvia M.A.A., 2012. "Productivity cost calculations in health economic evaluations: Correcting for compensation mechanisms and multiplier effects," Social Science & Medicine, Elsevier, vol. 75(11), pages 1981-1988.
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    More about this item

    Keywords

    Absenteeism; Indirect cost; Teamwork; Output shortfall; Friction cost method; Societal perspective;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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