The friction cost method: a comment

Abstract

The friction cost method has been proposed as an alternative to the human-capital approach of estimating indirect costs. We argue that the friction cost method is based on implausible assumptions not supported by neoclassical economic theory. Furthermore consistently applying the friction cost method would mean that the method should also be applied in the estimation of direct costs, which would mean that the costs of health care programmes are substantially decreased. It is concluded that the friction cost method does not seem to be a useful alternative to the human-capital approach in the estimation of indirect costs.