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Firms' Moral Hazard in Sickness Absences

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  • René Böheim

    (WIFO)

  • Thomas Leoni

    (WIFO)

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 firms' moral hazard problems in sickness absences by analysing 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 percent 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 percent and sickness absences were almost 11 percent shorter following the removal of the refund. Several robustness checks confirm these results.

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Bibliographic Info

Paper provided by WIFO in its series WIFO Working Papers with number 400.

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Length: 38 pages
Date of creation: 15 Sep 2011
Date of revision:
Handle: RePEc:wfo:wpaper:y:2011:i:400

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Keywords: Absenteeism Moral Hazard Sickness Insurance;

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References

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  1. Nicolas R. Ziebarth, 2009. "Long-Term Absenteeism and Moral Hazard: Evidence from a Natural Experiment," Discussion Papers of DIW Berlin 888, DIW Berlin, German Institute for Economic Research.
  2. Leo Bonato & Lusine Lusinyan, 2004. "Work Absence in Europe," IMF Working Papers 04/193, International Monetary Fund.
  3. Tim A. Barmby & Marco G. Ercolani & John G. Treble, 2002. "Sickness Absence: An International Comparison," Economic Journal, Royal Economic Society, vol. 112(480), pages F315-F331, June.
  4. Emilia Del Bono & Andrea Weber, 2008. "Do Wages Compensate for Anticipated Working Time Restrictions? Evidence from Seasonal Employment in Austria," Journal of Labor Economics, University of Chicago Press, vol. 26, pages 181-221.
  5. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  6. Brown, Sarah & Sessions, John G, 1996. " The Economics of Absence: Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 10(1), pages 23-53, March.
  7. Barmby, Tim & Sessions, John G & Treble, John G, 1994. " Absenteeism, Efficiency Wages and Shirking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(4), pages 561-66.
  8. Markussen, Simen & Mykletun, Arnstein & Røed, Knut, 2010. "The Case for Presenteeism," IZA Discussion Papers 5343, Institute for the Study of Labor (IZA).
  9. repec:ese:iserwp:2006-37 is not listed on IDEAS
  10. Johansson, Per & Palme, Marten, 2005. "Moral hazard and sickness insurance," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1879-1890, September.
  11. Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian Social Security Database," NRN working papers 2009-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    • Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian social security database," IEW - Working Papers 410, Institute for Empirical Research in Economics - University of Zurich.
  12. David Rae, 2005. "How to Reduce Sickness Absences in Sweden: Lessons from International Experience," OECD Economics Department Working Papers 442, OECD Publishing.
  13. Elisabeth Fevang & Simen Markussen & Knut R�ed, 2014. "The Sick Pay Trap," Journal of Labor Economics, University of Chicago Press, vol. 32(2), pages 305 - 336.
  14. Eva Kislingerová, 2011. "," Ekonomika a Management, University of Economics, Prague, vol. 2011(4), pages 4.
  15. Barmby, Tim & Stephan, Gesine, 2000. "Worker Absenteeism: Why Firm Size May Matter," Manchester School, University of Manchester, vol. 68(5), pages 568-77, September.
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Cited by:
  1. Ziebarth, Nicolas R. & Karlsson, Martin, 2013. "The Effects of Expanding the Generosity of the Statutory Sickness Insurance System," IZA Discussion Papers 7250, Institute for the Study of Labor (IZA).

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