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Worker Absenteeism in Search Equilibrium

  • Per Engström
  • Bertil Holmlund

The paper presents a tractable general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state. Absenteeism is driven by random shocks to the value of leisure that are private information to the workers. Firms offer wages, and possibly sick pay, so as to maximize expected profits, recognizing that the compensation package affects the queue of job applicants and possibly the absence rate as well. Shocks to the value of leisure among nonemployed individuals interact with their search decisions and trigger movements into and out of the labor force. The analysis provides a number of results concerning the impact of social insurance benefits and other determinants of workers’ and firms’ behavior. For example, higher nonemployment benefits are shown to increase absenteeism among employed workers. The normative anlysis identifies externalities associated with firm-provided sick pay and examines the welfare implications of alternative policies. Conditions are given under which welfare equivalence holds between publicly provided and firm-provided sick pay. Benefit differentiation across states of non-work are found to be associated with non-trivial welfare gains.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1607.

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Date of creation: 2005
Date of revision:
Handle: RePEc:ces:ceswps:_1607
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  1. Holmlund, B., 2000. "Labor Taxation in Search Equilibrium with Home Production," Papers 2000:1, Uppsala - Working Paper Series.
  2. Per Johansson & Mårten Palme, 2002. "Assessing the Effect of Public Policy on Worker Absenteeism," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 381-409.
  3. Arai, Mahmood & Thoursie, Peter Skogman, 2005. "Incentives and selection in cyclical absenteeism," Labour Economics, Elsevier, vol. 12(2), pages 269-280, April.
  4. Barmby, Tim & Sessions, John G & Treble, John G, 1994. " Absenteeism, Efficiency Wages and Shirking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(4), pages 561-66.
  5. Barmby, Tim & Orme, Chris D & Treble, John, 1990. "Worker Absenteeism: An Analysis Using Microdata," CEPR Discussion Papers 434, C.E.P.R. Discussion Papers.
  6. Flinn, C. & Heckman, J., 1982. "New methods for analyzing structural models of labor force dynamics," Journal of Econometrics, Elsevier, vol. 18(1), pages 115-168, January.
  7. Barmby, Tim A. & Ercolani, Marco G. & Treble, John G., 2000. "Sickness Absence: An International Comparison," IRISS Working Paper Series 2000-03, IRISS at CEPS/INSTEAD.
  8. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392 Elsevier.
  9. Garibaldi, Pietro & Wasmer, Etienne, 2003. "Equilibrium Search Unemployment, Endogenous Participation and Labour Market Flows," CEPR Discussion Papers 3986, C.E.P.R. Discussion Papers.
  10. Andrea Ichino & Regina T. Riphahn, 2001. "The Effect of Employment Protection on Worker Effort. A Comparison of Absenteeism During and After Probation," CESifo Working Paper Series 596, CESifo Group Munich.
  11. Henrekson, Magnus & Persson, Mats, 2001. "The Effects on Sick Leave of Changes in the Sickness Insurance System," SSE/EFI Working Paper Series in Economics and Finance 0444, Stockholm School of Economics, revised 08 Aug 2001.
  12. Holmlund, Bertil, 2004. "Sickness Absence and Search Unemployment," Working Paper Series 2004:6, Uppsala University, Department of Economics.
  13. Askildsen, Jan Erik & Bratberg, Espen & Nilsen, Øivind Anti, 2002. "Unemployment, Labour Force Composition and Sickness Absence: A Panel Data Study," IZA Discussion Papers 466, Institute for the Study of Labor (IZA).
  14. repec:oup:restud:v:51:y:1984:i:4:p:559-78 is not listed on IDEAS
  15. Brown, Sarah & Sessions, John G, 1996. " The Economics of Absence: Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 10(1), pages 23-53, March.
  16. Coles, Melvyn G. & Treble, John G., 1996. "Calculating the price of worker reliability," Labour Economics, Elsevier, vol. 3(2), pages 169-188, September.
  17. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
  18. Allen, Steven G, 1981. "An Empirical Model of Work Attendance," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 77-87, February.
  19. Ehrenberg, Ronald G, 1970. "Absenteeism and the Overtime Decision," American Economic Review, American Economic Association, vol. 60(3), pages 352-57, June.
  20. Andrea Ichino & Regina T. Riphahn, 2005. "The Effect of Employment Protection on Worker Effort: Absenteeism During and After Probation," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 120-143, 03.
  21. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  22. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  23. Monojit Chatterji & Colin J. Tilley, 2002. "Sickness, absenteeism, presenteeism, and sick pay," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 669-687, October.
  24. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  25. Toikka, Richard S, 1976. "A Markovian Model of Labor Market Decisions by Workers," American Economic Review, American Economic Association, vol. 66(5), pages 821-34, December.
  26. Johansson, Per & Palme, Marten, 1996. "Do economic incentives affect work absence? Empirical evidence using Swedish micro data," Journal of Public Economics, Elsevier, vol. 59(2), pages 195-218, February.
  27. Hesselius, Patrik, 2003. "Does Sick Absence Increase the Risk of Unemployment?," Working Paper Series 2003:15, Uppsala University, Department of Economics.
  28. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
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