Sickness Absence and Search Unemployment

43 Pages Posted: 21 Jul 2004

See all articles by Bertil Holmlund

Bertil Holmlund

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: June 2004

Abstract

The paper presents a model that allows a unified analysis of sickness absence and search unemployment. Sickness appears as random shocks to individual utility functions, interacts with individual search and labor supply decisions and triggers movements across labor force states. The employed worker prefers absence for sufficiently severe sickness and the unemployed worker may prefer non-participation if the disutility of search is amplified by sickness. The decisions governing labor force transitions are influenced by social insurance benefits available for sick or unemployed workers. We examine how these benefits affect individual decisions on absence and search and the implications for employment, unemployment and non-participation. The normative analysis of the socially optimal benefit structure suggests that there is, in general, a case for benefit differentiation across states of non-work. In particular, there is a case for a benefit structure that rewards active job search.

Keywords: sickness absence, search, unemployment, sickness benefits, unemployment

JEL Classification: J65, J68, C14

Suggested Citation

Holmlund, Bertil, Sickness Absence and Search Unemployment (June 2004). CESifo Working Paper Series No. 1227. Available at SSRN: https://ssrn.com/abstract=567109

Bertil Holmlund (Contact Author)

Uppsala University - Department of Economics ( email )

SE-75120 Uppsala
Sweden
+46 18 471 1122 (Phone)
+46 18 471 1478 (Fax)

HOME PAGE: http://www.nek.uu.se/faculty/holmlund/index.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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