D4 Published development or research report or study
A kink that makes you sick: the incentive effect of sick pay on absence
Authors: Böckerman Petri, Kanninen Ohto, Suoniemi Ilpo
Publisher: Institute for the Study of Labor (IZA)
Publishing place: Turku
Publication year: 2014
Web address : http://ftp.iza.org/dp8205.pdf
Abstract
This paper examines the effect of the replacement rule of the Finnish sickness insurance
system on the duration of sickness absence. A pre-determined, piecewise linear policy rule in
which the replacement rate is determined by past earnings allows identification of the effect
using a regression kink design. 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 is on the order of 1.4.
This paper examines the effect of the replacement rule of the Finnish sickness insurance
system on the duration of sickness absence. A pre-determined, piecewise linear policy rule in
which the replacement rate is determined by past earnings allows identification of the effect
using a regression kink design. 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 is on the order of 1.4.
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