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Worker Absenteeism in Search Equilibrium

  • Engström, Per

    ()

    (Department of Economics)

  • Holmlund, Bertil

    ()

    (Department of Economics)

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-trival welfare gains.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2005:22.

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Length: 35 pages
Date of creation: 01 Nov 2005
Date of revision:
Publication status: Published in Scandinavian Journal of Economics, 2007.
Handle: RePEc:hhs:uunewp:2005_022
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  1. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  2. Holmlund, Bertil, 2004. "Sickness Absence and Search Unemployment," Working Paper Series 2004:6, Uppsala University, Department of Economics.
  3. Barmby, Tim & Orme, Chris D & Treble, John, 1990. "Worker Absenteeism: An Analysis Using Microdata," CEPR Discussion Papers 434, C.E.P.R. Discussion Papers.
  4. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc.
  5. 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.
  6. 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.
  7. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Burdett, Kenneth, et al, 1984. "Earnings, Unemployment, and the Allocation of Time over Time," Review of Economic Studies, Wiley Blackwell, vol. 51(4), pages 559-78, October.
  9. 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.
  10. Jan Erik Askildsen & Espen Bratberg & Øivind Anti Nilsen, 2005. "Unemployment, labor force composition and sickness absence: a panel data study," Health Economics, John Wiley & Sons, Ltd., vol. 14(11), pages 1087-1101.
  11. 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.
  12. Coles, Melvyn G. & Treble, John G., 1996. "Calculating the price of worker reliability," Labour Economics, Elsevier, vol. 3(2), pages 169-188, September.
  13. 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.
  14. 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.
  15. Garibaldi, Pietro & Wasmer, Etienne, 2003. "Equilibrium Search Unemployment, Endogenous Participation and Labour Market Flows," CEPR Discussion Papers 3986, C.E.P.R. Discussion Papers.
  16. Bertil Holmlund, 2002. "Labor Taxation in Search Equilibrium with Home Production," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 415-430, November.
  17. 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.
  18. Ehrenberg, Ronald G, 1970. "Absenteeism and the Overtime Decision," American Economic Review, American Economic Association, vol. 60(3), pages 352-57, June.
  19. Ichino, Andrea & Riphahn, Regina, 2003. "The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation," CEPR Discussion Papers 3847, C.E.P.R. Discussion Papers.
  20. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  21. 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.
  22. Hesselius, Patrik, 2003. "Does Sick Absence Increase the Risk of Unemployment?," Working Paper Series 2003:15, Uppsala University, Department of Economics.
  23. Arai, Mahmood & Thoursie, Peter Skogman, 2005. "Incentives and selection in cyclical absenteeism," Labour Economics, Elsevier, vol. 12(2), pages 269-280, April.
  24. 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.
  25. 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.
  26. 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.
  27. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  28. 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.
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