Friday, July 25, 2014

Firms and sickness absences

In a new working paper, Thomas Leoni and I investigate how firms respond to changed costs of their workers' sickness absencess. In Austria, similar to many countries, social security insures firms against their workers' sickness absences by refunding (part of) the wages paid to absent workers if they are too sick to work.

We look at sickness absences before and after a change in the Austrian social security which defined whether a firm had to pay a deductible (a co-payment) or not. The insurance may create a moral hazard for firms, leading to inefficient monitoring of absences or to an underinvestment in the prevention of absences. Increasing the costs for firms (by changing the amount a firm has to bear should a worker become too sick to work) might lead to stricter monitoring, better prevention of accidents or different hiring practices.

The discontinuity of the insurance allows us to to estimate the differences in the incidences and durations of sicknesses for firms that faced the deductible and those who did not. We find that the deductible did not lead to different sickness outcomes and conclude that relatively low deductibles have little impact on firms' management of sicknesses.