Sick Pay Provision in Experimental Labor Markets

Peter Dürsch, Jörg Oechssler and Radovan Vadovic ()

No 08-14, Papers from Sonderforschungsbreich 504

Abstract: Sick pay is a common provision in most labor contracts. This paper employs an experimental gift-exchange environment to explore two related questions using both managers and undergraduates as subjects. First, do workers reciprocate sick pay in the same way as they reciprocate wage payments? Second, do firms benefit from offering sick pay? Firms may benefit in two different ways: directly, from workers reciprocating higher sick pay with higher efforts; and indirectly, from self-selection of reciprocal workers into contracts with higher sick pay. Our main finding is that the direct effect is rather weak in terms of effort and negative in terms of profits. However, when there is competition among firms for workers, sick pay can become an important advantage. Consequently, competition leads to a higher provision of sick pay relative to a monopsonistic labor market.

Keywords: sick pay; sick leave; experiment; gift exchange (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 D43 L13 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Sick pay provision in experimental labor markets (2012)
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