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Firms' Moral Hazard in Sickness Absences

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  • Böheim, René

    ()
    (University of Linz)

  • Leoni, Thomas

    ()
    (WIFO - Austrian Institute of Economic Research)

Abstract

Sick 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 Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6005.

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Length: 37 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6005

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Keywords: absenteeism; moral hazard; sickness insurance;

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References

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  1. Brown, Sarah & Sessions, John G, 1996. " The Economics of Absence: Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 10(1), pages 23-53, March.
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  3. Ziebarth, Nicolas R., 2013. "Long-term absenteeism and moral hazard—Evidence from a natural experiment," Labour Economics, Elsevier, Elsevier, vol. 24(C), pages 277-292.
  4. Del Bono, Emilia & Weber, Andrea, 2006. "Do wages compensate for anticipated working time restrictions? Evidence from seasonal employment in Austria," ISER Working Paper Series 2006-37, Institute for Social and Economic Research.
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  8. Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian Social Security Database," NRN working papers, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria 2009-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  9. David Rae, 2005. "How to Reduce Sickness Absences in Sweden: Lessons from International Experience," OECD Economics Department Working Papers, OECD Publishing 442, OECD Publishing.
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  11. Barmby, Tim A. & Ercolani, Marco G. & Treble, John G., 2000. "Sickness Absence: An International Comparison," IRISS Working Paper Series, IRISS at CEPS/INSTEAD 2000-03, IRISS at CEPS/INSTEAD.
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Cited by:
  1. Nicolas R. Ziebarth & Martin Karlsson, 2014. "The Effects Of Expanding The Generosity Of The Statutory Sickness Insurance System," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 29(2), pages 208-230, 03.

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