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Sick Pay Provision in Experimental Labor Markets

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  • Dürsch, Peter

    ()
    (Department of Economics, University of Heidelberg)

  • Oechssler, Jörg

    ()
    (Department of Economics, University of Heidelberg)

  • Vadovic, Radovan

    ()
    (ITAM)

Abstract

Sick pay is a common provision in most labor contracts. This paper employs an experimental gift-exchange environment to explore two related questions using both managers and undergraduates as subjects. First, do workers reciprocate sick pay in the same way as they reciprocate wage payments? Second, do firms benefit from offering sick pay? Firms may benefit in two different ways: directly, from workers reciprocating higher sick pay with higher efforts; and indirectly, from self-selection of reciprocal workers into contracts with higher sick pay. Our main finding is that the direct effect is rather weak in terms of effort and negative in terms of profits. However, when there is competition among firms for workers, sick pay can become an important advantage. Consequently, competition leads to a higher provision of sick pay relative to a monopsonistic labor market.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 08-14.

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Length: 34 pages
Date of creation: 08 Oct 2008
Date of revision:
Handle: RePEc:xrs:sfbmaa:08-14

Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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Citations

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Cited by:
  1. Puhani, Patrick A. & Sonderhof, Katja, 2009. "The Effects of a Sick Pay Reform on Absence and on Health-Related Outcomes," IZA Discussion Papers 4607, Institute for the Study of Labor (IZA).
  2. Filippin, Antonio & Crosetto, Paolo, 2014. "A Reconsideration of Gender Differences in Risk Attitudes," IZA Discussion Papers 8184, Institute for the Study of Labor (IZA).
  3. Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
  4. Steven Tucker & Charles Noussair & Fortuna Casoria & Arno Riedl, 2013. "Experimental Labor Markets And Policy Considerations: Incomplete Contracts And Macroeconomic Aspects," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 398-420, 07.
  5. Bauernschuster, Stefan & Duersch, Peter & Oechssler, Jörg & Vadovic, Radovan, 2010. "Mandatory Sick Pay Provision: A Labor Market Experiment," Working Papers 0498, University of Heidelberg, Department of Economics.
  6. Nicolas R. Ziebarth, 2009. "Long-Term Absenteeism and Moral Hazard: Evidence from a Natural Experiment," SOEPpapers on Multidisciplinary Panel Data Research 172, DIW Berlin, The German Socio-Economic Panel (SOEP).
  7. Charness, Gary & Du, Ninghua & Yang, Chun-Lei & Yao, Lan, 2013. "Promises in contract design," European Economic Review, Elsevier, vol. 64(C), pages 194-208.

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