Template-Type: ReDIF-Paper 1.0 
Title: The impact of firms' expectations & adjustments on the productivity cost of illness
Author-Name: Michał Jakubczyk 
Author-Name: Beata Koń 
Abstract: Sickness-related absenteeism hinders firms' productivity and reduces output, an effect referred to as indirect cost (IC) and often included when assessing the burden of an illness or cost-effectiveness of a treatment. The companies may, however, foresee this risk and modify hiring or contracting policies. We present a model of a firm allowing to estimate IC while accounting for such adjustments. We show that the risk of illness does not change the general shape and properties of the (expected) marginal productivity function. We apply our model to several illustrative examples and show that firm's adjustments impact IC in an ambiguous way, depending on detailed company/market characteristics. Sometimes the company reduces the employment (further increasing IC),yet sometimes the opposite (even generating indirect gains). Contrary to previous literature findings, teamwork and shortfall penalties may reduce IC insome settings. Our analysis highlights that IC should be split into the result ofcompanies preparing for and actually experiencing sick leaves, at least whenfriction cost approach is taken. To what extent the former counts as IC maydepend on the (labour and good) market structure and the interpretation ofequilibrium values. These considerations are usually not addressed in appliedIC assessment, which may bias the results.
Number: 2016-008
Length: 27 pages 
Creation-Date: 2016-04
Keywords: Absenteeism, Productivity, Indirect cost, Teamwork, Output Shortfall, Friction Cost Method
Classification-JEL: D21, J24, J21, L23
File-URL: https://hdl.handle.net/20.500.12182/1088
File-Format: Application/pdf
DOI: 10.33119/kaewps2016008
Handle: RePEc:sgh:kaewps:2016008