Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/233313 
Year of Publication: 
2014
Series/Report no.: 
Discussion paper No. 97
Publisher: 
Aboa Centre for Economics (ACE), Turku
Abstract: 
We examine the effect of the replacement rule of a social insurance system on sickness absence. The elasticity of absence with respect to the benefit level is a critical parameter in defining the optimal sickness insurance scheme. A pre-determined, piecewise linear policy rule in which the replacement rate is determined by past earnings allows identification of the causal effect using a regression kink design. Using a large administrative dataset, we find a substantial and robust behavioral response. The statistically significant point estimate of the elasticity of the duration of sickness absence with respect to the replacement rate in a social insurance system is on the order of 1.
Subjects: 
Sick pay
labor supply
sickness absence
paid sick leave
regression kink design
JEL: 
C72
C73
Document Type: 
Working Paper

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