Vortrag
The Effects of Expanding the Generosity of the Statutory Sickness Insurance System

Martin Karlsson, Nicolas R. Ziebarth


Volkswirtschaftliches Seminar : Institut für Volkswirtschaftslehre, Universität Augsburg
Augsburg, 15.11.2010



Abstract:
This article analyzes the effects of an increase in statutory sick pay from 80 to 100 percent of forgone gross wages in Germany. Difference-in-differences approaches show that the increase in generosity decreased employee attendance by about ten percent or one day per employee per year. Heterogeneity in response behavior was of great importance and employee health its main driver. For employers, the increased contribution represented increased labor costs of about e1.8 billion per year. Our empirical evidence supports the notion that employers tried to compensate for this shock to labor costs by increasing overtime and decreasing wages.

Abstract

This article analyzes the effects of an increase in statutory sick pay from 80 to 100 percent of forgone gross wages in Germany. Difference-in-differences approaches show that the increase in generosity decreased employee attendance by about ten percent or one day per employee per year. Heterogeneity in response behavior was of great importance and employee health its main driver. For employers, the increased contribution represented increased labor costs of about e1.8 billion per year. Our empirical evidence supports the notion that employers tried to compensate for this shock to labor costs by increasing overtime and decreasing wages.



JEL-Classification: H51;I18;J22;J 32
Keywords: Sickness absence, statutory sick pay, natural experiment, Socio-Economic Panel Study (SOEP)
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