Munich Personal RePEc Archive

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.

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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.

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