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The Incentive Effects of Sickness Absence Compensation – Analysis of a Natural Experiment in Eastern Europe☆

In: Health and Labor Markets

Author

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  • Márton Csillag

Abstract

This chapter examines the evolution of the number of days spent on sick leave following the 2011 reform which halved the maximum sick benefit provided by statutory health insurance in Hungary. This policy change sharply decreased benefits for a large group of high earners, while leaving the incentive to claim sickness benefits unchanged for lower earners, providing us with a “quasi-experimental” setup to identify the incentives effect of sickness benefits. We use a difference-in-differences type methodology to evaluate the short-term effect of the reform. We rely on high-quality administrative data and analyze a sample comprised of prime-age male employees with high earnings and stable employment. Our results show that the number of days spent on sick leave fell substantially for those experiencing the full halving of benefits. Estimating the response of the number of sick days with respect to the fall in potential sickness benefits, we find a significant elasticity of −0.45.

Suggested Citation

  • Márton Csillag, 2019. "The Incentive Effects of Sickness Absence Compensation – Analysis of a Natural Experiment in Eastern Europe☆," Research in Labor Economics, in: Health and Labor Markets, volume 47, pages 195-225, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rleczz:s0147-912120190000047007
    DOI: 10.1108/S0147-912120190000047007
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    Cited by:

    1. Sebők, Anna, 2019. "A KRTK Adatbank Kapcsolt Államigazgatási Paneladatbázisa [The panel of linked administrative data in the CERS databank]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1230-1236.

    More about this item

    Keywords

    Sickness absence; statutory long-term sick pay; difference-in-difference methods; natural experiment; labor supply; moral hazard; I18; J22; J32;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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