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primary topic: Mandatory Sick Pay Provision: A Labor Market Experiment

Mandatory Sick Pay Provision: A Labor Market Experiment
type: Article
abstract: Sick-pay is a common provision in labor contracts. It insures workers against a sudden loss of income due to unexpected absences and helps them smooth consumption. Therefore, many governments find sick-pay socially desirable and choose to mandate its provision. But sick-pay is not without its problems. Not only it suffers from moral hazard but more importantly it is subject to a potentially serious adverse selection problem (higher sick-pay attracts sicker workers). In this paper we report results of an experiment which inquires to the extend and the severity of the adverse selection when sick-pay is voluntary versus when it is mandatory. Theoretically, mandating sick-pay may be effective in diminishing adverse selection. However, our data provide clean evidence that counteracting effects are more salient. Mandatory sick pay exacerbates moral hazard problems by changing fairness perceptions and, as a consequence, increases sick pay provision far above the mandatory levels.
date: 2010
status: published
author list: authors
type: EPrint
type: WorkingPaperEPrint
is part of: repository
has document: Mandatory Sick Pay Provision: A Labor Market Experiment (PDF)
has document: Mandatory Sick Pay Provision: A Labor Market Experiment (Other)
subject: 330 Wirtschaft

Mandatory Sick Pay Provision: A Labor Market Experiment (PDF)
type: Document
has file: Bauernschuster_2010_dp498.pdf
has part: Bauernschuster_2010_dp498.pdf

Jörg Oechssler
type: Person
given name: Jörg
family name: Oechssler

Stefan Bauernschuster
type: Person
given name: Stefan
family name: Bauernschuster

Peter Duersch
type: Person
given name: Peter
family name: Duersch

Radovan Vadovic
type: Person
given name: Radovan
family name: Vadovic

Mandatory Sick Pay Provision: A Labor Market Experiment (Other)
type: Document
is version of: Mandatory Sick Pay Provision: A Labor Market Experiment (PDF)
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Mandatory Sick Pay Provision: A Labor Market Experiment (Other)
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Mandatory Sick Pay Provision: A Labor Market Experiment (Other)
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Mandatory Sick Pay Provision: A Labor Market Experiment (Other)
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Mandatory Sick Pay Provision: A Labor Market Experiment (Other)
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primary topic: Mandatory Sick Pay Provision: A Labor Market Experiment

330 Wirtschaft
type: Concept
preferred label: 330 Economics @en