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A kink that makes you sick: The effect of sick pay on absence
Author(s) -
Böckerman Petri,
Kanninen Ohto,
Suoniemi Ilpo
Publication year - 2018
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2620
Subject(s) - exploit , earnings , elasticity (physics) , economics , econometrics , sick leave , regression , social insurance , statistics , computer science , mathematics , labour economics , physics , finance , market economy , computer security , thermodynamics
Summary We exploit a regression kink design to estimate the elasticity of the duration of sickness absence with respect to replacement rate. Elasticity is a central parameter in defining the optimal social insurance scheme compensating for lost earnings due to sickness. We use comprehensive administrative data and a kink in the policy rule near the median earnings. We find a statistically significant estimate of the elasticity of the order of one.