Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/201449
Authors: 
Eliason, Marcus
Johansson, Per-Olov
Nilsson, Martin
Year of Publication: 
2018
Series/Report no.: 
Working Paper 2018:11
Abstract: 
This study tests for forward-looking moral hazard in the social insurance system by exploiting a 1991 reform in Sweden. The replacement rate was reduced for short absences but not for long absences, which introduced a potential future cost of returning to work. Using this exogenous variation in the replacement rate and controlling for dynamic selection, we find that the potential future cost of returning to work decreased the outflow from absence by 10 percent. This finding suggests that long-term sickness absentees are forward-looking, and highlights the importance of taking forward-looking behavior into account when designing and evaluating social insurance programs.
Subjects: 
disability insurance
dynamic incentives
forward-looking behavior
moral hazard
natural experiment
sickness absence
sickness insurance
JEL: 
H55
I12
I13
J22
Document Type: 
Working Paper
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