Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 0444: The Effects on Sick Leave of Changes in the Sickness Insurance System

Magnus Henrekson () and Mats Persson ()
Additional contact information
Magnus Henrekson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Mats Persson: Institute of International Economic Studies, IIES, Postal: Stockholm University, S-106 91 Stockholm, Sweden

Abstract: In order to get a more complete picture of how labor supply is affected by economic incentives, the effects on absenteeism and not just on contracted hours should be taken into account. In particular, absenteeism due to sick leave can be considerable. In this paper we examine whether the level of sick leave compensation affects sick leave behavior. Using time-series data for Sweden spanning a long period (1955–99) with numerous changes of the compensation level, we generally find strong effects of the expected sign. Reforms implying more generous compensation for sick leave tend to be associated with permanent increases in total sick leave per person employed and vice versa. These findings are reinforced in a panel study covering the 1983–91 period.

Keywords: Absenteeism; Labor supply; Sick leave; Sickness insurance; Social security

JEL-codes: H55; I38; J22

27 pages, First version: May 16, 2001. Revised: March 18, 2003. Earlier revisions: August 8, 2001, August 8, 2001, August 8, 2001, May 21, 2002.

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