Search, Acute Illness, and Absenteeism

Abstract

This paper examines the economic costs of absenteeism from acute illness, which reduces labor market participation and burdens workers and firms. I extend a search, matching, and bargaining framework to incorporate medical care use, illness dynamics, health capital, and employer-sponsored health insurance (ESHI). Using data from the Medical Expenditure Panel Survey (MEPS), I estimate the model and find that acute illness lowers productivity, raises medical expenditures, and reduces welfare. Counterfactual analyses show subsidizing health capital improves total welfare. Moreover, while both a universal ESHI mandate and a penaltybased policy expand coverage, the penalty-based approach yields greater welfare gains.