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The Pros and Cons of Sick Pay Schemes: Testing for Contagious Presenteeism and Shirking Behavior

This paper proposes a test for the existence and degree of contagious presenteeism and negative externalities in sickness insurance schemes. First, we theoretically decompose moral hazard into shirking and contagious presenteeism behavior and derive testable conditions. Then, we implement the test exploiting German sick pay reforms and administrative industry-level data on certified sick leave by diagnoses. The labor supply adjustment for contagious diseases is significantly smaller than for non-contagious diseases. Lastly, using Google Flu data and the staggered implementation of US sick leave reforms, we show that flu rates decrease after employees gain access to paid sick leave.

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File URL: http://dx.doi.org/10.3929/ethz-a-010681869
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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 15-394.

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Length: 47 pages
Date of creation: Sep 2015
Handle: RePEc:kof:wpskof:15-394
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