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Valuing productivity costs in a changing macroeconomic environment: the estimation of colorectal cancer productivity costs using the friction cost approach

Lookup NU author(s): Professor Linda Sharp


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The friction cost approach (FCA) has been proposed as an alternative to the human capital approach for productivity cost valuation. However, FCA estimates are context dependent and influenced by extant macroeconomic conditions. We applied the FCA to estimate colorectal cancer labor productivity costs and assessed the impact of a changing macroeconomic environment on these estimates.Data from colorectal cancer survivors (n = 159) derived from a postal survey undertaken in Ireland March 2010 to January 2011 were combined with national wage data, population-level survival data, and occupation-specific friction periods to calculate temporary and permanent disability, and premature mortality costs using the FCA. The effects of changing labor market conditions between 2006 and 2013 on the friction period were modeled in scenario analyses. Costs were valued in 2008 euros.In the base-case, the total FCA per-person productivity cost for incident colorectal cancer patients of working age at diagnosis was a,not sign8543. In scenario 1 (a 2.2 % increase in unemployment), the fall in the friction period caused total productivity costs to decrease by up to 18 % compared to base-case estimates. In scenario 2 (a 9.2 % increase in unemployment), the largest decrease in productivity cost was up to 65 %. Adjusting for the vacancy rate reduced the effect of unemployment on the cost results.The friction period used in calculating labor productivity costs greatly affects the derived estimates; this friction period requires reassessment following changes in labor market conditions. The influence of changes in macroeconomic conditions on FCA-derived cost estimates may be substantial.

Publication metadata

Author(s): Hanly P, Koopmanschap M, Sharp L

Publication type: Article

Publication status: Published

Journal: European Journal of Health Economics

Year: 2016

Volume: 17

Issue: 5

Pages: 553-561

Print publication date: 01/06/2016

Online publication date: 29/05/2015

Acceptance date: 22/05/2015

ISSN (print): 1618-7598

ISSN (electronic): 1618-7601

Publisher: Springer


DOI: 10.1007/s10198-015-0698-5


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Funder referenceFunder name
IS1211COST Action
SA/2004/1Health Research Board