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Title:Mandatory sick pay provision: A labor market experiment PDF Logo
Authors:Bauernschuster, Stefan
Duersch, Peter
Oechssler, Jörg
Vadovic, Radovan
Issue Date:2009
Series/Report no.:Jena economic research papers 2009,076
Abstract:The question whether a minimum rate of sick pay should be mandated is much debated. We study the effects of this kind of intervention in an experimental labor market that is rich enough to allow for moral hazard, adverse selection, and crowding out of good intentions to occur. We find that higher sick pay is reciprocated by workers through higher effort but only if sick pay is not mandated. We also study adverse selection effects when workers have different probabilities of getting sick and can reject the hypothesis that this leads to market breakdown. Overall, we find that mandating sick pay actually leads to a higher voluntary provision of sick pay by firms.
Subjects:sick pay
sick leave
gift exchange.
Document Type:Working Paper
Appears in Collections:Jena Economic Research Papers (2007-2014), Max-Planck-Institut für Ökonomik und Universität Jena

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