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Long-term absenteeism and moral hazard—Evidence from a natural experiment

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  • Ziebarth, Nicolas R.

Abstract

This paper shows that long-term sick employees are unlikely to be very responsive to moderate monetary labor supply incentives. The paper, theoretically and empirically, evaluates the labor supply effects of cuts in statutory sick pay levels on long-term absenteeism in Germany. Cutting sick pay did not significantly reduce the average incidence and duration of sick leave periods longer than six weeks. A simple theoretical model confirms the empirical findings under the assumption that the long-term sick are seriously sick. Thus, moral hazard seems to be less of an issue in the upper tail of the sickness spell distribution. However, the results show heterogeneity in the effects and significant duration decreases for certain subsamples.

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  • Ziebarth, Nicolas R., 2013. "Long-term absenteeism and moral hazard—Evidence from a natural experiment," Labour Economics, Elsevier, vol. 24(C), pages 277-292.
  • Handle: RePEc:eee:labeco:v:24:y:2013:i:c:p:277-292
    DOI: 10.1016/j.labeco.2013.09.004
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    Keywords

    Long-term absenteeism; Statutory long-term sick pay; Moral hazard; Natural experiment; Socio-Economic Panel Study (SOEP);

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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