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A Kink that Makes You Sick: the Effect of Sick Pay on Absence in a Social Insurance System

Author

Listed:
  • Petri Böckerman

    (Palkansaajien tutkimuslaitos)

  • Ohto Kanninen

    (Palkansaajien tutkimuslaitos)

  • Ilpo Suoniemi

    (Palkansaajien tutkimuslaitos)

Abstract

We examine the effect of the replacement rate of a social insurance system on sickness absence by exploiting a regression kink design. The elasticity of absence with respect to the benefit level, in addition to risk preferences, is a critical parameter in defining the optimal sickness insurance scheme. Using a large administrative dataset, we find a robust behavioral response. The statistically significant point estimate of the elasticity of the duration of sickness absence with respect to the replacement rate in a social insurance system is on the order of 1. Given our estimate, we characterize the optimal benefit level.

Suggested Citation

  • Petri Böckerman & Ohto Kanninen & Ilpo Suoniemi, 2015. "A Kink that Makes You Sick: the Effect of Sick Pay on Absence in a Social Insurance System," Working Papers 297, Palkansaajien tutkimuslaitos, Labour Institute for Economic Research.
  • Handle: RePEc:pst:wpaper:297
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    References listed on IDEAS

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    Cited by:

    1. David S. Lee & Pauline Leung & Christopher J. O’Leary & Zhuan Pei & Simon Quach, 2021. "Are Sufficient Statistics Necessary? Nonparametric Measurement of Deadweight Loss from Unemployment Insurance," Journal of Labor Economics, University of Chicago Press, vol. 39(S2), pages 455-506.
    2. Stijn Baert & Bas van der Klaauw & Gijsbert van Lomwel, 2018. "The effectiveness of medical and vocational interventions for reducing sick leave of self‐employed workers," Health Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 139-152, February.
    3. Kyyrä, Tomi & Paukkeri, Tuuli, 2018. "Using a Kinked Policy Rule to Estimate the Effect of Experience Rating on Disability Inflow," Working Papers 105, VATT Institute for Economic Research.
    4. Antti Saastamoinen & Mika Kortelainen, 2020. "When Does Money Stick in Education? Evidence from A Kinked Grant Rule," Education Finance and Policy, MIT Press, vol. 15(4), pages 708-735, Fall.

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    More about this item

    Keywords

    Sick pay; labor supply; sickness absence; regression kink design; social insurance;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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