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Sick pay provision in experimental labor markets

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  • Duersch, Peter
  • Oechssler, Jörg
  • Vadovic, Radovan

Abstract

Sick pay is a common provision in most labor contracts. This paper employs an experimental gift exchange environment to explore two related questions using both managers and undergraduates as subjects. First, do workers reciprocate generous sick pay with higher effort? Second, do firms benefit from offering sick pay? Our main finding is that workers do reciprocate generous sick pay with higher effort. However, firms benefit from offering sick pay in terms of profits only if there is competition among firms for workers. Consequently, competition leads to a higher voluntary provision of sick pay relative to a monopsonistic labor market.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 1 ()
Pages: 1-19

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:1:p:1-19

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Web page: http://www.elsevier.com/locate/eer

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Keywords: Sick pay; Sick leave; Experiment; Gift exchange;

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References

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  22. Bauernschuster, Stefan & Duersch, Peter & Oechssler, Jörg & Vadovic, Radovan, 2010. "Mandatory sick pay provision: A labor market experiment," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 870-877, December.
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Cited by:
  1. Nicolas R. Ziebarth, 2009. "Long-Term Absenteeism and Moral Hazard: Evidence from a Natural Experiment," Discussion Papers of DIW Berlin 888, DIW Berlin, German Institute for Economic Research.
  2. Patrick Puhani & Katja Sonderhof, 2009. "The Effects of a Sick Pay Reform on Absence and on Health-Related Outcomes," University of St. Gallen Department of Economics working paper series 2009 2009-34, Department of Economics, University of St. Gallen.
  3. Filippin, A. & Crosetto, P., 2014. "A reconsideration of gender differences in risk attitudes," Working Papers 2014-01, Grenoble Applied Economics Laboratory (GAEL).
  4. Bauernschuster, Stefan & Duersch, Peter & Oechssler, Jörg & Vadovic, Radovan, 2010. "Mandatory sick pay provision: A labor market experiment," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 870-877, December.
  5. Charness, Gary & Du, Ninghua & Yang, Chun-Lei & Yao, Lan, 2013. "Promises in contract design," European Economic Review, Elsevier, vol. 64(C), pages 194-208.
  6. Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
  7. Casoria, Fortuna & Riedl, Arno, 2012. "Experimental Labor Markets and Policy Considerations: Incomplete Contracts and Macroeconomic Aspects," IZA Discussion Papers 7102, Institute for the Study of Labor (IZA).

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