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Firm Insurance and Sickness Absence of Employees

Author

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  • Westergård-Nielsen, Niels C.

    () (Copenhagen Business School)

  • Pertold, Filip

    () (CERGE-EI)

Abstract

We investigate the effect of firms' participation in an insurance scheme on the long-term sickness absence of their employees, using administrative records. In Denmark and several other European countries, firms are obliged to cover the first two weeks of sickness. The insurance scheme is provided by government authority and is designed to help small firms with the financial burden related to sickness absence of their workers. We use an exogenously-set threshold for the eligibility as a policy experiment. Using regression discontinuity in the fuzzy form, we show that sickness absence in insured firms is much more prevalent than in uninsured firms. Sickness spells in insured firms are shorter and the conditional probability to return back to work from sickness is much higher in insured firms. These results suggest that employees in insured firms are less monitored during the first two weeks and that their sickness is less serious. We demonstrate in the paper that the minimum cost of the present insurance scheme is similar to about 1100 man-years. On top of that comes a substantial cost to more short time sickness.

Suggested Citation

  • Westergård-Nielsen, Niels C. & Pertold, Filip, 2012. "Firm Insurance and Sickness Absence of Employees," IZA Discussion Papers 6782, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6782
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    References listed on IDEAS

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    1. Johansson, Per & Palme, Marten, 2005. "Moral hazard and sickness insurance," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1879-1890, September.
    2. Battistin, Erich & Rettore, Enrico, 2008. "Ineligibles and eligible non-participants as a double comparison group in regression-discontinuity designs," Journal of Econometrics, Elsevier, vol. 142(2), pages 715-730, February.
    3. Ziebarth, Nicolas R., 2013. "Long-term absenteeism and moral hazard—Evidence from a natural experiment," Labour Economics, Elsevier, vol. 24(C), pages 277-292.
    4. Ose, Solveig Osborg, 2005. "Working conditions, compensation and absenteeism," Journal of Health Economics, Elsevier, vol. 24(1), pages 161-188, January.
    5. 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.
    6. Markussen, Simen & Røed, Knut & Røgeberg, Ole J. & Gaure, Simen, 2011. "The anatomy of absenteeism," Journal of Health Economics, Elsevier, vol. 30(2), pages 277-292, March.
    7. Cristina Yunzal-Butler & Theodore J. Joyce & Andrew D. Racine, 2009. "Maternal Smoking and the Timing of WIC Enrollment," NBER Working Papers 14728, National Bureau of Economic Research, Inc.
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    Cited by:

    1. René Böheim & Thomas Leoni, 2014. "Firms' Sickness Costs and Workers' Sickness Absences," NBER Working Papers 20305, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    sickness absence; moral hazard; insurance for employers;

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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