Optimal sickness benefits in a principal–agent model
Sebastien Menard ()
Additional contact information
Sebastien Menard: GAINS-TEPP and IRA (University of Le Mans)
Social Choice and Welfare, 2021, vol. 57, issue 1, No 2, 5-33
Abstract This paper studies the optimal design of sickness benefits in a repeated principal–agent model, where the fraudsters are not observed by the principal. Sickness compensation protects workers against the income fluctuations implied by the risk of illness and its provision is limited by the presence of fraudsters using this protection to temporarily adjust their labour supply. We show that the slope of the optimal contract depends on the dynamics of the rate of fraudsters over time. When the duration of temporary shocks on the disutility of work is shorter than the average duration of diseases, the sickness benefits must increase over time. In addition, A tax dependent on the length of the sick leave makes it possible to minimise the cost for a given promise-keeping constraint. Contrary to intuition, this tax must be decreasing because the necessity to penalise the shortest sick leave to deter agents from cheating.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s00355-020-01307-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:sochwe:v:57:y:2021:i:1:d:10.1007_s00355-020-01307-6
Ordering information: This journal article can be ordered from
http://www.springer. ... c+theory/journal/355
Access Statistics for this article
Social Choice and Welfare is currently edited by Bhaskar Dutta, Marc Fleurbaey, Elizabeth Maggie Penn and Clemens Puppe
More articles in Social Choice and Welfare from Springer, The Society for Social Choice and Welfare Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().