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Labor market costs of illness: prevalence matters

  • Thomas DeLeire

    (Harris Graduate School of Public Policy Studies, The University of Chicago, USA)

  • Willard Manning

    (Department of Health Studies, Biological Sciences Division and Harris Graduate School of Public Policy Studies, The University of Chicago, USA)

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. Copyright © 2003 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.812
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 13 (2004)
Issue (Month): 3 ()
Pages: 239-250

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Handle: RePEc:wly:hlthec:v:13:y:2004:i:3:p:239-250
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. Gruber, Jonathan, 2000. "Health insurance and the labor market," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 12, pages 645-706 Elsevier.
  2. Mark V. Pauly & Sean Nicholson & Judy Xu & Dan Polsky & Patricia M. Danzon & James F. Murray & Marc L. Berger, 2002. "A general model of the impact of absenteeism on employers and employees," Health Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 221-231.
  3. Sandy, Robert & Elliott, Robert F, 1996. "Unions and Risk: Their Impact on the Level of Compensation for Fatal Risk," Economica, London School of Economics and Political Science, vol. 63(250), pages 291-309, May.
  4. Susan L. Ettner & Richard G. Frank & Ronald C. Kessler, 1997. "The Impact of Psychiatric Disorders on Labor Market Outcomes," NBER Working Papers 5989, National Bureau of Economic Research, Inc.
  5. Jonathan Gruber, 1998. "Health Insurance and the Labor Market," NBER Working Papers 6762, National Bureau of Economic Research, Inc.
  6. Janet Currie & Brigitte C. Madrian, 1998. "Health, Health Insurance and the Labor Market," JCPR Working Papers 27, Northwestern University/University of Chicago Joint Center for Poverty Research.
  7. Werner B. F. Brouwer & Marc A. Koopmanschap & Frans F. H. Rutten, 1997. "Productivity Costs Measurement Through Quality of Life? A Response to the Recommendation of the Washington Panel," Health Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 253-259.
  8. Pencavel, John, 1987. "Labor supply of men: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 1, pages 3-102 Elsevier.
  9. 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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