Health and sick leave - policy makers' trade-offs
This paper is built on a simple idea that work is healthy for healthy workers, while it may delay recovery for sick workers. Its main novelty is that it sets out a theory designed to integrate this simple idea into a more standard labor supply model, where workers trade o¤ absence and leisure against the economic loss in- volved. A calibrated version of this model is then used to discuss optimal sickness insurance policies. The results are: (i) there is a conict between maximizing health and minimizing sick leave, (ii) optimal sick-leave bene ts are neither zero nor 100 percent, (iii) a calibrated version of the model predicts optimal sick-leave bene ts to be around 70 percent of earnings.