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Related Experiment Videos

The friction-cost method : replacement for nothing and leisure for free?

Werner B F Brouwer1, Marc A Koopmanschap

  • 1Institute for Medical Technology Assessment, Erasmus Medical Center/Erasmus University, Rotterdam, The Netherlands. Brouwer@bmg.eur.nl

Pharmacoeconomics
|March 8, 2005
PubMed
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The friction-cost method offers realistic productivity cost estimates by considering workforce adaptation. This study validates its theoretical basis and accounting for leisure time

Area of Science:

  • Health Economics
  • Societal Productivity Analysis
  • Economic Evaluation Methods

Background:

  • The friction-cost method is an alternative to the human-capital method for estimating productivity costs in economic evaluations.
  • Key criticisms include a lack of theoretical underpinning and the treatment of leisure time as valueless.
  • The method's core concept is the societal adaptation period following long-term absenteeism, influenced by labor availability and unemployment.

Purpose of the Study:

  • To theoretically demonstrate the time-allocation shifts within the friction-cost method.
  • To address criticisms regarding the method's theoretical basis and valuation of leisure time.
  • To highlight the need for separate valuation of changes in unpaid work and leisure time in economic analyses.

Main Methods:

Related Experiment Videos

  • Development of a theoretical time-allocation model.
  • Analysis of time use shifts under the friction-cost method.
  • Comparison with the human-capital method regarding unpaid work and leisure valuation.

Main Results:

  • The time-allocation model supports the theoretical underpinning of the friction-cost method.
  • Leisure time is implicitly valued in terms of Quality-Adjusted Life Years (QALYs), consistent with standard economic evaluation practices.
  • Changes in unpaid work and leisure time require separate valuation, as unpaid production losses from the newly employed may exceed gains from absentees, potentially leading to societal losses or leisure sacrifices.

Conclusions:

  • The friction-cost method possesses theoretical validity and appropriately values leisure time within economic evaluations.
  • Economic analyses must incorporate separate valuations for shifts in unpaid work and leisure time.
  • Accurate societal productivity cost estimation requires accounting for these nuanced changes in non-market activities.