Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 19/2007: Trade-offs between health and absenteeism in welfare states: striking the balance

Simen Markussen ()
Additional contact information
Simen Markussen: Ragnar Frisch Centre for Economic Research, Postal: Gaustadallèen 21, N-0349 Oslo, Norway

Abstract: Workers’absenteeism due to illness represents a major concern in several countries. Absenteeism are however not very well understood in economics. This paper presents a model where absenteeism is understood in relation to health. Its main predictions are (i) intermediate welfare state generosity lead to the lowest absence rates as (ii) generous regimes results in excess long-term absenteeism and (iii) strict regimes lead to excess short-term absenteeism. (iv) Maximizing health is not the same as minimizing absenteeism. Finally, these predictions are supported by aggre- gate data for 12 OECD countries.

Keywords: Absenteeism; Health; Dynamic programming; Welfare state policies

JEL-codes: C61; H53; H55; I31; J08

32 pages, September 18, 2007

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