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Firms’ moral hazard in sickness absences

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  • René Böheim
  • Thomas Leoni

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 analyzing 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% 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% and sickness absences were almost 11% shorter following the removal of the refund. Several robustness checks confirm these results.

Suggested Citation

  • René Böheim & Thomas Leoni, 2011. "Firms’ moral hazard in sickness absences," Economics working papers 2011-13, Department of Economics, Johannes Kepler University Linz, Austria.
  • Handle: RePEc:jku:econwp:2011_13
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    Cited by:

    1. Nicolas R. Ziebarth & Martin Karlsson, 2014. "The Effects Of Expanding The Generosity Of The Statutory Sickness Insurance System," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(2), pages 208-230, March.
    2. René Böheim & Thomas Leoni, 2014. "Firms' Sickness Costs and Workers' Sickness Absences," NBER Working Papers 20305, National Bureau of Economic Research, Inc.
    3. Martin Halla & Susanne Pech & Martina Zweimüller, 2017. "The effect of statutory sick-pay on workers' labor supply and subsequent health," Working Papers 2017-04, Faculty of Economics and Statistics, University of Innsbruck.
    4. Martin Halla & Susanne Pech & Martina Zweimüller, 2015. "The Effect of Statutory Sick Pay Regulations on Workers’ Health," CDL Aging, Health, Labor working papers 1504, The Christian Doppler (CD) Laboratory Aging, Health, and the Labor Market, Johannes Kepler University Linz, Austria.
    5. de Groot, Nynke & Koning, Pierre, 2016. "Assessing the effects of disability insurance experience rating. The case of The Netherlands," Labour Economics, Elsevier, vol. 41(C), pages 304-317.
    6. Pierre Koning, 2016. "Privatizing sick pay: Does it work?," IZA World of Labor, Institute of Labor Economics (IZA), pages 324-324, December.

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    More about this item

    Keywords

    absenteeism; moral hazard; sickness insurance;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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