A Kink that Makes You Sick: The Effect of Sick Pay on Absence

Petri, Böckerman and Ohto, Kanninen and Ilpo, Suoniemi (2018): A Kink that Makes You Sick: The Effect of Sick Pay on Absence. Published in: Journal of Applied Econometrics , Vol. 4, No. 33 (20 June 2018): pp. 568-579.

Abstract

We exploit a regression kink design to estimate the elasticity of the duration of sickness absence with respect to replacement rate. Elasticity is a central parameter in defining the optimal social insurance scheme compensating for lost earnings due to sickness. We use comprehensive administrative data and a kink in the policy rule near the median earnings. We find a statistically significant estimate of the elasticity of the order of one.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sick pay, labor supply, sickness absence, regression kink design, social insurance
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; I - Health, Education, and Welfare > I1 - Health > I13 - Health Insurance, Public and Private; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply

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