The Sick Pay Trap
AbstractIn most countries, employers are financially responsible for sick pay during an initial period of a worker's absence spell, after which the public insurance system covers the bill. Based on a quasi-natural experiment in Norway, where pay liability was removed for pregnancy-related absences, we show that firms' absence costs significantly affect employees' absence behavior. However, by restricting pay liability to the initial period of the absence spell, firms are discouraged from letting long-term sick workers back into work, since they then face the financial risk associated with subsequent relapses. We show that this disincentive effect is statistically and economically significant.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5655.
Length: 22 pages
Date of creation: Apr 2011
Date of revision:
Publication status: published in: Journal of Labor Economics, 2014, 32 (2), 305-336
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Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-30 (All new papers)
- NEP-HEA-2011-04-30 (Health Economics)
- NEP-HRM-2011-04-30 (Human Capital & Human Resource Management)
- NEP-IAS-2011-04-30 (Insurance Economics)
- NEP-LAB-2011-04-30 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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