Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127288
Authors: 
Dürsch, Peter
Oechssler, Jörg
Vadovic, Radovan
Year of Publication: 
2008
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 476
Abstract: 
Sick pay is a common provision in most labor contracts. This paper employs an experimental gift-exchange environment to explore two related questions using both managers and undergraduates as subjects. First, do workers reciprocate sick pay in the same way as they reciprocate wage payments? Second, do firms benefit from offering sick pay? Firms may benefit in two different ways: directly, from workers reciprocating higher sick pay with higher efforts; and indirectly, from self-selection of reciprocal workers into contracts with higher sick pay. Our main finding is that the direct effect is rather weak in terms of effort and negative in terms of profits. However, when there is competition among firms for workers, sick pay can become an important advantage. Consequently, competition leads to a higher provision of sick pay relative to a monopsonistic labor market.
Subjects: 
sick pay
sick leave
experiment
gift exchange
JEL: 
C72
C91
C92
D43
L13
Document Type: 
Working Paper

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