In case of sickness, workers typically receive sick pay. In several countries, social security insures firms against their workers’ sickness absences. Such an insurance may create a moral hazard for firms, leading to inefficient monitoring of absences or to an under-investment in the prevention of absences. We investigate firms’ moral hazard in sickness absences by exploiting a legislative change that took place in Austria in 2000. In September 2000, an insurance fund was abolished that refunded firms’ for the costs of their blue-collar workers’ sickness absences. Firms did not receive a refund for their white-collar sickness absences. Until September 2000, small firms were refunded for all wage costs of blue-collar workers’ sickness absences. Large firms, in contrast, received only 70% of the wages paid to sick blue-collar workers refunded. Using a difference-in-differences-in-differences approach, we estimate the causal impact of refunding forms for their workers’ sickness absences. Our results indicate that the incidence of blue-collar workers’ sickness in small firms dropped by almost 10 percent. Sickness durations were about 8 percent shorter due to the removal of the refund. Several robustness checks confirm these results. A regression discontinuity analysis of the incidence and duration of blue-collar workers’ sickness in the vicinity of the threshold provides additional evidence that firms reacted to the institutional incentives. Blue-collar workers in firms that received more compensation were more often, and for longer periods, on sickness leave than those who worked in firms that received less compensation.
Presented by:
Thomas Leoni (Austrian Institute of Economic Research)
Date & time:
July 6, 2011 12:00 pm - June 7, 2011 1:00 pm
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