Sickness Absence, Moral Hazard, and the Business Cycle

Abstract

The procyclical nature of sickness absence has been documented by many scholars in literature. So far, explanations have been based on labor force composition and reduced moral hazard caused by fear of job loss during recessions. In this paper, we propose and test a third mechanism caused by reduced moral hazard during booms and infections. We suggest that the workload is higher during economic booms and thus employees have to go to work despite being sick. In a theoretical model focusing on infectious diseases, we show that this will provoke infections of coworkers leading to overall higher sickness absence during economic upturns. Using state-level aggregated data from 112 German public health insurance funds (out of 145 in total), we find that sickness absence due to infectious diseases shows the largest procyclical pattern, as predicted by our theoretical model.

Differences in Sickness Allowance Receipt between Swedish Speakers and Finnish Speakers in Finland

“…Sickness allowance receipt may nevertheless be considered a more complex health measure than disability pension. For instance, the uptake of sick leave relates to the business cycle, so that rates of sickness allowance receipt are high when unemployment rates are low, and low when unemployment rates are high (Pichler 2015). More complexity also stem from legislation and insurance policies.…”

The Pros and Cons of Sick Pay Schemes: Testing for Contagious Presenteeism and Noncontagious Absenteeism Behavior

“…The staggered implementation of several sick pay schemes at the regional level in the U.S. naturally leads to the estimation of standard difference-in-differences (DD) models. Although the U.S. sick pay schemes vary in their comprehensiveness, and some have exemptions reducing the effectiveness 1 Other papers in the literature on sickness absence looked at and decomposed general determinants (Barmby et al 1994;Markussen et al 2011), investigated the impact of probation periods (Riphahn 2004;Ichino and Riphahn 2005), culture (Ichino and Maggi 2000), gender (Ichino and Moretti 2009;Gilleskie 2010), income taxes (Dale-Olsen 2013), and unemployment (Askildsen et al 2005;Nordberg and Røed 2009;Pichler 2015). There is also research on the impact of sickness on earnings (Sandy and Elliott 2005;Markussen 2012 of lowering infection rates, we can show the following: When U.S. employees gain access to paid sick leave, the general flu rate in the population decreases significantly.…”

The Pros and Cons of Sick Pay Schemes: Testing for Contagious Presenteeism and Shirking Behavior

“…However, none of these papers estimates labor supply effects by disease groups. In particular, this paper extends the small economic literature on presenteeism at the workplace (Aronsson et al 2000;Chatterji and Tilley 2002;Brown and Sessions 2004;Pauly et al 2008;Barmby and Larguem 2009;Johns 2010;Böckerman and Laukkanen 2010;Markussen et al 2012;Pichler 2015;Hirsch et al 2015;Ahn and Yelowitz 2015). With one exception, none of the empirical studies on presenteeism just cited identifies or intends to identify causal effects of sick leave schemes on presenteeism.…”

“…However, because they have access to sick pay, it is rational for them to be 8 The SIS model is the classic framework for mathematically analyzing contagious diseases and was first discussed in the medical literature by Ross (1916) and Kermack and McKendrick (1927). 9 It is outside the scope of this paper to model the transmission rate of contagious diseases explicitly (Philipson 2000;Barmby and Larguem 2009;Pichler 2015). 10 In Germany, on a given day, about 7 percent of the workforce are on sick leave (see the section titled "The Policy Reforms of 1996 and 1999".…”

“…Although related and sometimes combined in laws, sick pay schemes differ crucially from maternity 1 Other papers in the literature on sickness absence looked at and decomposed general determinants (Barmby et al 1994;Markussen et al 2011), investigated the impact of probation periods (Riphahn 2004;Ichino and Riphahn 2005), culture (Ichino and Maggi 2000), gender (Ichino and Moretti 2009;Gilleskie 2010), income taxes (Dale-Olsen 2013), and unemployment (Askildsen et al 2005;Nordberg and Røed 2009;Pichler 2015). There is also research on the impact of sickness on earnings (Sandy and Elliott 2005;Markussen 2012). leave schemes (Gruber 1994;Ruhm 1998;Waldfogel 1998;Rossin-Slater et al 2013;Lalive et al 2014;Carneiro et al 2015;Thomas 2015) due to the negative externalities induced by contagious presenteeism in combination with information asymmetries between employers and employees about the type and extent of the employee's disease.…”