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Benefit Morale and Cross-Country Diversity in Sick Pay Entitlements

Authors

  • Daniel Arnold

    1. IAAEU Trier and University Trier, Trier, Germany
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    • The author thanks the editors for their help in improving this paper and two anonymous referees for their very helpful comments. The author is grateful for comments offered during workshops at the universities of Konstanz and Tübingen; the first CESifo workshop on labor markets and social security in Dresden; the annual meeting of the European Public Choice Society in Rennes; the World Meeting of the Public Choice Societies in Miami and the Insurance, Inequality, Health conference in Darmstadt. Thanks goes to Florian Baumann, Ivo Bischoff, Tobias Brändle, Adrian Chadi, Tim Friehe, Matthias Giesecke, Laszlo Goerke, Inga Hillesheim, Tobias König, Mario Mechtel, Hendrik Schmitz, and Jens Wrona for their helpful suggestions. Thanks for excellent research assistance goes to Ramona Heeke, Johann Majer, Eliza Stenzhorn and Christina Vonnahme. Any errors are the author's alone.

Summary

This paper analyzes the impact of a country's level of benefit morale on generosity of sick pay entitlements by means of a political economy model and an empirical investigation. Higher benefit morale reduces the incidence of absence. On the one hand, this makes insurance cheaper with the usual demand side reaction. On the other hand, being absent less often, the voter prefers less insurance. The former effect dominates at lower, the latter at higher levels of benefit morale. We present empirical evidence for both effects in a sample of 31 countries between 1981 and 2010.

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