Worker Absenteeism in Search Equilibrium

40 Pages Posted: 15 Dec 2005

See all articles by Per Engström

Per Engström

Uppsala University - Department of Economics

Bertil Holmlund

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

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.

Keywords: absenteeism, search, unemployment, social insurance

JEL Classification: J21, J64, J65

Suggested Citation

Engström, Per and Holmlund, Bertil, Worker Absenteeism in Search Equilibrium (November 2005). CESifo Working Paper Series No. 1607. Available at SSRN: https://ssrn.com/abstract=870396

Per Engström

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden
+46 - 18 - 471 15 65 (Phone)
+46 - 18 - 471 14 78 (Fax)

HOME PAGE: http://www.nek.uu.se/cgi/staffpage.pl?PId=13,lang=eng

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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