Working Paper Series, Department of Economics, Uppsala University
No 2004:6:
Sickness Absence and Search Unemployment
Bertil Holmlund ()
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 nonparticipation 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 nonparticipation. 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 benefits; (follow links to similar papers)
JEL-Codes: J21; J64; J65; (follow links to similar papers)
38 pages, June 10, 2004
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