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A Natural Experiment on Sick Pay Cuts, Sickness Absence, and Labor Costs

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  • Nicolas R. Ziebarth
  • Martin Karlsson

Abstract

This study estimates the reform effects of a reduction in statutory sick pay levels on various outcome dimensions. A federal law reduced the legal obligation of German employers to provide 100 percent continued wages for up to six weeks per sickness episode to 80 percent. This measure increased the ratio of employees having no days of absence by about 7.5 percent. The mean number of absence days per year decreased by about 5 percent. The reform might have reduced total labor costs by about €1.5 billion per year which might have led to the creation of around 50,000 new jobs.

Suggested Citation

  • Nicolas R. Ziebarth & Martin Karlsson, 2009. "A Natural Experiment on Sick Pay Cuts, Sickness Absence, and Labor Costs," SOEPpapers on Multidisciplinary Panel Data Research 244, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp244
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    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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