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

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Abstract

Background

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.

Methods

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.

Results

In the base-case, the total FCA per-person productivity cost for incident colorectal cancer patients of working age at diagnosis was €8543. 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.

Conclusions

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.

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Acknowledgments

Data collection was funded by the Health Research Board (SA/2004/1). We appreciate the support of COST Action IS1211 CANWON. We are grateful to the colorectal cancer survivors who took part in the survey, the clinicians and nurses who supported the fieldwork, and Alan O’Ceilleachair who undertook the patient survey. We also thank the clerical support team at the National Cancer Registry who aided with survey administration and data input and Paul Walsh for providing survival estimates.

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Authors and Affiliations

  1. National College of Ireland, Mayor Street, Dublin 1, Ireland

    Paul Hanly

  2. Department of Health Policy and Management, Erasmus University Rotterdam, Rotterdam, The Netherlands

    Marc Koopmanschap

  3. Institute of Health and Society, Newcastle University, Newcastle upon Tyne, UK

    Linda Sharp

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  1. Paul Hanly
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  2. Marc Koopmanschap
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  3. Linda Sharp
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Correspondence to Paul Hanly.

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Hanly, P., Koopmanschap, M. & Sharp, L. Valuing productivity costs in a changing macroeconomic environment: the estimation of colorectal cancer productivity costs using the friction cost approach. Eur J Health Econ 17, 553–561 (2016). https://doi.org/10.1007/s10198-015-0698-5

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  • DOI: https://doi.org/10.1007/s10198-015-0698-5

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