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Mandatory Sick Pay Provision: A Labor Market Experiment

Author

Listed:
  • Stefan Bauernschuster

    (University of Jena)

  • Jörg Oechssler

    (Department of Economics, University of Heidelberg, Germany)

  • Peter Duersch

    (University of Heidelberg)

  • Radovan Vadovic

    (ITAM, Mexico City)

Abstract

The question whether a minimum rate of sick pay should be mandated is much debated. We study the effects of this kind of intervention in an experimental labor market that is rich enough to allow for moral hazard, adverse selection, and crowding out of good intentions to occur. We find that higher sick pay is reciprocated by workers through higher effort but only if sick pay is not mandated. We also study adverse selection effects when workers have different probabilities of getting sick and can reject the hypothesis that this leads to market breakdown. Overall, we find that mandating sick pay actually leads to a higher voluntary provision of sick pay by ?rms.

Suggested Citation

  • Stefan Bauernschuster & Jörg Oechssler & Peter Duersch & Radovan Vadovic, 2009. "Mandatory Sick Pay Provision: A Labor Market Experiment," Jena Economics Research Papers 2009-076, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2009-076
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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2009/wp_2009_076.pdf
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    Cited by:

    1. Bedsworth, Fredrick & Neal, Daniel R. & Portillo, Javier E. & Willardsen, Kevin, 2021. "Asymmetric information and insurance: An experimental approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).
    2. Antonio FILIPPIN & Paolo CROSETTO, 2014. "A Reconsideration of Gender Differences in Risk Attitudes," Departmental Working Papers 2014-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    3. Christopher J. Cronin & Matthew C. Harris & Nicolas R. Ziebarth, 2022. "The Anatomy of U.S. Sick Leave Schemes: Evidence from Public School Teachers," NBER Working Papers 29956, National Bureau of Economic Research, Inc.
    4. Johanna Catherine Maclean & Stefan Pichler & Nicolas R Ziebarth, 2025. "Mandated Sick Pay: Coverage, Utilization, and Crowding-in," Journal of the European Economic Association, European Economic Association, vol. 23(5), pages 1868-1907.
    5. Charness, Gary & Du, Ninghua & Yang, Chun-Lei & Yao, Lan, 2013. "Promises in contract design," European Economic Review, Elsevier, vol. 64(C), pages 194-208.
    6. Shastitko, Andrey (Шаститко, Андрей) & Komkova, Anastasia Andreevna (Комкова, Анастасия Андреевна) & Kurdin, Alexander (Курдин, Александр), 2016. "Competition Policy and Incentives for Innovation [Экономическая Теория Об Адвокатировании Конкуренции]," Working Papers 1448, Russian Presidential Academy of National Economy and Public Administration.
    7. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    8. Maclean, J. Catherine & Pichler, Stefan & Ziebarth, Nicolas R., 2020. "Mandated Sick Pay: Coverage, Utilization, and Welfare Effects," IZA Discussion Papers 13132, Institute of Labor Economics (IZA).
    9. Duersch, Peter & Oechssler, Jörg & Vadovic, Radovan, 2012. "Sick pay provision in experimental labor markets," European Economic Review, Elsevier, vol. 56(1), pages 1-19.
    10. Cronin, C.J.; & Harris, M. C.; & Ziebarth, N. R.;, 2024. "The Anatomy of U.S. Sick Leave Schemes:Evidence from Public School Teachers," Health, Econometrics and Data Group (HEDG) Working Papers 24/10, HEDG, c/o Department of Economics, University of York.
    11. Ziebarth, Nicolas R., 2013. "Long-term absenteeism and moral hazard—Evidence from a natural experiment," Labour Economics, Elsevier, vol. 24(C), pages 277-292.
    12. Burfurd, Ingrid & Gangadharan, Lata & Nemes, Veronika, 2012. "Stars and standards: Energy efficiency in rental markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 153-168.

    More about this item

    Keywords

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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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