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

Petri Böckerman, Ohto Kanninen and Ilpo Suoniemi
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Petri Böckerman: Turku School of Economics, Labor Institute for Economic Research and IZA

No 97, Discussion Papers from Aboa Centre for Economics

Abstract: We examine the effect of the replacement rule of a social insurance system on sickness absence. The elasticity of absence with respect to the benefit level is a critical parameter in defining the optimal sickness insurance scheme. A pre-determined, piecewise linear policy rule in which the replacement rate is determined by past earnings allows identification of the causal effect using a regression kink design. Using a large administrative dataset, we find a substantial and 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.

Keywords: Sick pay; labor supply; sickness absence; paid sick leave; regression kink design (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Pages: 59
Date: 2014-12
New Economics Papers: this item is included in nep-ger, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: A Kink that Makes You Sick: the Effect of Sick Pay on Absence in a Social Insurance System (2015)
Working Paper: A Kink that Makes You Sick: the Effect of Sick Pay on Absence in a Social Insurance System (2014)
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