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Long-Term Absenteeism and Moral Hazard: Evidence from a Natural Experiment

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  • Nicolas R. Ziebarth

Abstract

Sick leave payments represent a significant portion of public health expenditures and labor costs. Reductions in replacement levels are a commonly used instrument to tackle moral hazard and to increase the efficiency of the health insurance market. In Germany's Statutory Health Insurance (SHI) system, the replacement level for periods of sickness of up to six weeks was reduced from 100 percent to 80 percent of an employee's gross wage at the end of 1996. At the same time, the replacement level for individuals absent for a long-term period, i.e., from the seventh week onwards, was reduced from 80 to 70 percent. We show theoretically that the net reform effects on long-term absenteeism can be disentangled into a direct and an indirect effect. Using SOEP data, a natural control group, and two different treatment groups, we estimate the net and the direct effect on the incidence and duration of long-term absenteeism by difference-in-differences. Our findings suggest that, on population average, the reforms have not affected long-term absenteeism significantly, which is in accordance with our theoretical predictions, assuming that employees on long-term sick leave are seriously sick. However, we find some heterogeneity in the effects and a small but significant decrease in the duration of long-term absenteeism for the poor and middle-aged full-time employed persons. All in all, moral hazard and presenteeism seem to be less of an issue in the right tail of the sickness spell distribution. Finally, our calculations suggest that from 1997 to 2006, around five billion euros were redistributed from persons on long-term sick leave to the SHI insurance pool.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 888.

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Length: 49 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwwpp:dp888

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Keywords: Long-term absenteeism; sick pay; moral hazard; natural experiment; SOEP;

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Cited by:
  1. Laszlo Goerke & Markus Pannenberg, 2012. "Trade Union Membership and Sickness Absence: Evidence from a Sick Pay Reform," IAAEU Discussion Papers, Institute of Labour Law and Industrial Relations in the European Union (IAAEU) 201207, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  2. Nicolas R. Ziebarth, 2009. "Long-Term Absenteeism and Moral Hazard: Evidence from a Natural Experiment," SOEPpapers on Multidisciplinary Panel Data Research 172, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Böheim, René & Leoni, Thomas, 2011. "Firms' Moral Hazard in Sickness Absences," IZA Discussion Papers 6005, Institute for the Study of Labor (IZA).
  4. Nicolas R. Ziebarth & Martin Karlsson, 2009. "A Natural Experiment on Sick Pay Cuts, Sickness Absence, and Labor Costs," SOEPpapers on Multidisciplinary Panel Data Research 244, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. Westergård-Nielsen, Niels C. & Pertold, Filip, 2012. "Firm Insurance and Sickness Absence of Employees," IZA Discussion Papers 6782, Institute for the Study of Labor (IZA).
  6. Maria De Paola & Valeria Pupo & Vincenzo Scoppa, 2009. "Absenteeism In The Italian Public Sector: The Effects Of Changes In Sick Leave Compensation," Working Papers, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica) 200916, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
  7. Schneider, Julia & Beblo, Miriam, 2010. "Health at work - indicators and determinants : a revised literature and data review for Germany," IAB Discussion Paper, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 201017, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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