Stefan Bauernschuster (University of Jena) Jörg Oechssler () (Department of Economics, University of Heidelberg, Germany) Peter Duersch (University of Heidelberg) Radovan Vadovic (ITAM, Mexico City)
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The question whether a minimum rate of sick pay should be mandated is much debated. We study the effects of this kind of intervention in an experimental labor market that is rich enough to allow for moral hazard, adverse selection, and crowding out of good intentions to occur. We find that higher sick pay is reciprocated by workers through higher effort but only if sick pay is not mandated. We also study adverse selection effects when workers have different probabilities of getting sick and can reject the hypothesis that this leads to market breakdown. Overall, we find that mandating sick pay actually leads to a higher voluntary provision of sick pay by ?rms.
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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek in its series Jena Economic Research Papers in Economics with number
2009-076.
Find related papers by JEL classification: J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory C9 - Mathematical and Quantitative Methods - - Design of Experiments
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