Firms' Moral Hazard in Sickness Absences
AbstractSick workers in many countries receive sick pay during their illness-related absences from the workplace. In several countries, the social security system insures firms against their workers' sickness absences. However, this insurance may create moral hazard problems for firms, leading to the inefficient monitoring of absences or to an underinvestment in their prevention. In the present paper, we investigate firm' moral hazard problems in sickness absences by analyzing a legislative change that took place in Austria in 2000. In September 2000, an insurance fund that refunded firms for the costs of their blue-collar workers' sickness absences was abolished (firms did not receive a similar refund for their white-collar workers' sickness absences). Before that time, small firms were fully refunded for the wage costs of blue-collar workers' sickness absences. Large firms, by contrast, were refunded only 70% of the wages paid to sick blue-collar workers. Using a difference-in-differences-in-differences approach, we estimate the causal impact of refunding firms for their workers' sickness absences. Our results indicate that the incidences of blue-collar workers' sicknesses dropped by approximately 8% and sickness absences were almost 11% shorter following the removal of the refund. Several robustness checks confirm these results.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6005.
Length: 37 pages
Date of creation: Oct 2011
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Other versions of this item:
- René Böheim & Thomas Leoni, 2011. "Firms' Moral Hazard in Sickness Absences," CESifo Working Paper Series 3595, CESifo Group Munich.
- René Böheim & Thomas Leoni, 2011. "Firms’ moral hazard in sickness absences," NRN working papers 2011-10, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
- René Böheim & Thomas Leoni, 2011. "Firms' Moral Hazard in Sickness Absences," WIFO Working Papers 400, WIFO.
- René Böheim & Thomas Leoni, 2011. "Firms’ moral hazard in sickness absences," Economics working papers 2011-13, Department of Economics, Johannes Kepler University Linz, Austria.
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-CTA-2011-10-15 (Contract Theory & Applications)
- NEP-HRM-2011-10-15 (Human Capital & Human Resource Management)
- NEP-IAS-2011-10-15 (Insurance Economics)
- NEP-LAB-2011-10-15 (Labour Economics)
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