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Sick Pay Provision in Experimental Labor Markets

Peter Dürsch, Jörg Oechssler and Radovan Vadovic ()

No 08-14, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

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.

Pages: 34 pages
Date: 2008-10-08
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hea and nep-lab
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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Related works:
Journal Article: Sick pay provision in experimental labor markets (2012) Downloads
Working Paper: Sick Pay Provision in Experimental Labor Markets (2008) Downloads
Working Paper: Sick Pay Provision in Experimental Labor Markets (2008) Downloads
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