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-----Original Message-----
From: Ruggiero, Mrs. Ana Lucia (WDC) [mailto:[log in to unmask]]



THE DISTRIBUTIONAL EFFECTS OF ILLNESS

WHEN RECUPERATION IS ENDOGENOUS

 

Marie Moland Gaarder, Department of Economics, University College London, London, UK

Social Programs Division, Regional Operations Department II
The Inter-American Development Bank, September 2003

 

Available online as PDF [42p.] at:
http://www.iadb.org/sds/doc/Illness.pdf 

 

".............This paper explores the possible interactions of income and illness through labour supply choices, and the implications for health and health-cost measurements. Standard utility maximisation theory is used to analyse labour supply behaviour under constraints imposed by sickness and minimum consumption requirements.

 

For a rather general utility function, an empirically supported elasticity of substitution between leisure and consumption, and under the assumption that no sick pay is received, we find that only higher-wage individuals will choose to recuperate fully, whereas others will work while being sick as long as this yields additional efficient labour hours. Therefore, the income and welfare losses due to a given illness may be larger for low-wage individuals than for those with higher wages. This paper shows that the traditional models and measurements of illness can lead to distorted estimates of illness by neglecting the interaction between income and health....."

 

 

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