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Firms' Moral Hazard in Sickness Absences

  • René Böheim

    (WIFO)

  • Thomas Leoni

    (WIFO)

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

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Paper provided by WIFO in its series WIFO Working Papers with number 400.

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Length: 38 pages
Date of creation: 15 Sep 2011
Date of revision:
Handle: RePEc:wfo:wpaper:y:2011:i:400
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  1. Lusine Lusinyan & Leo Bonato, 2007. "Work Absence in Europe," IMF Staff Papers, Palgrave Macmillan, vol. 54(3), pages 475-538, July.
  2. Ziebarth, Nicolas R., 2013. "Long-term absenteeism and moral hazard—Evidence from a natural experiment," Labour Economics, Elsevier, vol. 24(C), pages 277-292.
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  10. Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian social security database," IEW - Working Papers 410, Institute for Empirical Research in Economics - University of Zurich.
    • Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian Social Security Database," NRN working papers 2009-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  11. Barmby, Tim & Sessions, John G & Treble, John G, 1994. " Absenteeism, Efficiency Wages and Shirking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(4), pages 561-66.
  12. David Rae, 2005. "How to Reduce Sickness Absences in Sweden: Lessons from International Experience," OECD Economics Department Working Papers 442, OECD Publishing.
  13. Tim A. Barmby & Marco G. Ercolani & John G. Treble, 2002. "Sickness Absence: An International Comparison," Economic Journal, Royal Economic Society, vol. 112(480), pages F315-F331, June.
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  16. Eva Kislingerová, 2011. "," Ekonomika a Management, University of Economics, Prague, vol. 2011(4), pages 4.
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