A Kink that Makes You Sick: The Effect of Sick Pay on Absence

Summary

We exploit a regression kink design to estimate the elasticity of the duration of sickness absence with respect to replacement rate. Elasticity is a central parameter in defining the optimal social insurance scheme compensating for lost earnings due to sickness. We use comprehensive administrative data and a kink in the policy rule near the median earnings. We find a statistically significant estimate of the elasticity of the order of one.

Publication Information

Böckerman, P., Kanninen, O., & Suoniemi, I. (2018), A Kink that Makes You Sick: The Effect of Sick Pay on Absence, Journal of Applied Econometrics, 33:4, 568—579.

• ISSN: 0883-7252, e-ISSN: 1099-1255