Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82657
Authors: 
Holmlund, Bertil
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2004:6
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.
Subjects: 
Sickness absence
search
unemployment
sickness benefits
unemployment benefits
JEL: 
J21
J64
J65
Document Type: 
Working Paper

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