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Worker replacement and cost-benefit analysis of life-saving healthcare programs, a precautionary note

Listed author(s):
  • Philippe Tessier


    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes)

  • Hélène Sultan-Taïeb


    (LEG - Laboratoire d'Economie et de Gestion - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique)

  • Thomas Barnay


    (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

The assumption according to which ill individuals can be replaced at work that underpins the 'friction cost method' (FCM) to value productivity costs has been primarily discussed within the framework of cost-utility analysis. This paper investigates the consequences of this assumption for cost-benefit analysis (CBA). It makes three contributions. First, it provides the first analytical account of the overall consequences of ill worker replacement on social welfare and it analyzes the associated compensation effects within a CBA framework. Second, it highlights a double counting problem that arises when ill worker replacement is assumed in the CBA of life-saving health care programs. To the best of our knowledge, no satisfactory solution to this problem has yet been provided in the literature. Third, this paper suggests and discusses two original ways to address this double counting issue. One consists in adjusting value of a statistical life estimations for the well-being provided by future incomes. Another possibility lies in the estimation of marginal rates of substitution between health and wealth so as to directly monetize the value of life over and above consumption. We show that both solutions raise unresolved questions that should be addressed in future research to enable appropriate use of the FCM in CBA.

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Paper provided by HAL in its series Post-Print with number hal-01297820.

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Date of creation: 2014
Publication status: Published in Health Economics, Policy and Law, Cambridge University Press (CUP), 2014, <10.1017/S1744133113000352>
Handle: RePEc:hal:journl:hal-01297820
DOI: 10.1017/S1744133113000352
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