Sickness Absence and Local Benefit Cultures

• Author: Mårten Palme,Assar Lindbeck,Mats Persson
• Date: 01 January 2016
• Published date: 01 January 2016
• DOI: http://doi.org/10.1111/sjoe.12131

Scand. J. of Economics 118(1), 49–78, 2016

DOI: 10.1111/sjoe.12131

Sickness Absence and Local Benefit

Cultures∗

Assar Lindbeck†

Institute for International Economic Studies, SE-106 91 Stockholm, Sweden

assar.lindbeck@iies.su.se

M˚

arten Palme‡

Stockholm University, SE-106 91 Stockholm, Sweden

marten.palme@ne.su.se

Mats Persson

Institute for International Economic Studies, SE-106 91 Stockholm, Sweden

mats.persson@iies.su.se

Abstract

In many countries, sickness absence financed by generous insurance benefits is an important

concern in the policy debate. There are strong variations in absence behavior among local

geographical areas. Such variations are difficult to explain in terms of observable socioe-

conomic factors. In this paper, we investigate whether such variations are related to group

effects in the form of social interaction among individuals within neighborhoods. Well-known

methodological problems arise when trying to answer this question. A special feature of our

efforts to deal with these problems is that we adopt several alternative approaches to identify

group effects. Our study is based on a rich set of Swedish panel data, and we find indications

of group effects in each of our approaches.

Keywords: Income insurance; neighborhood effects; sickness absence; sick-pay; social

norms

JEL classification:H56; I38; J22; Z13

I. Introduction

Welfare-state arrangements affect individual behavior not only through tra-

ditional economic incentives but also through non-economic factors, such

†Also affiliated with Research Institute of Industrial Economics, Stockholm, Sweden.

‡Also affiliated with IZA, Bonn, Germany.

∗We thank two anonymous referees for detailed comments that helped us to improve the

paper substantially. We are also grateful for comments on previous drafts of the paper

from seminar participants at the Economics Department and the Institute for International

Economic Studies at Stockholm University, the Research Institute of Industrial Economics

in Stockholm, the Economics Department at Uppsala and Oslo Universities, the European

Economic Association meeting in Budapest, and the Copenhagen Business School.

CThe editors of The Scandinavian Journal of Economics 2015.

50 Sickness absence and local benefit cultures

as group effects (i.e., social processes whereby individuals adjust their

behavior to what is regarded as “normal” behavior among their peers). Al-

though group effects have been extensively analyzed theoretically, empirical

analysis has been impeded by lack of data as well as by methodological

problems.1

However, there is an emerging empirical body of literature on group

effects, dealing with such diverse fields as schooling, criminality, shirking

among employees, and the individual’s choice of pension plans; see, for in-

stance, Ammermueller and Pischke (2009), Sacerdote (2001), Glaeser et al.

(1996, 2003), Ichino and Maggie (2000), and Duflo and Saez (2002, 2003).

A few studies of group effects have focused on the utilization of various

welfare-state arrangements. For instance, Moffitt (1983), Bertrand et al.

(2000), and ˚

Aslund and Fredriksson (2009) have dealt with the utilization

of social assistance (welfare), Rege et al. (2012) have studied disability

insurance, Aizer and Currie (2004) have studied the use of publicly funded

maternity care, and Hesselius et al. (2013) have analyzed the consequences

for sickness absence of relaxing the requirements for medical certification.

In this paper, we ask to what extent individual differences in sickness

absence can be explained by group effects at the neighborhood level. Two

stylized facts in the use of the Swedish sick-pay insurance system motivate

this research question. First, the utilization rate varies substantially over

time, and it is not possible to explain these variations by changes in the

rules of the insurance system, the health of the population, or conditions

on the labor market. Figure 1 shows the average work absence in Sweden

between 1955 and 2012. This figure reveals that the average numbers of

sickness-absence days nearly doubled between 1997 and 2002, and fell

by two-thirds between 2002 and 2010. It is hard to explain these large

fluctuations without some kind of amplifying mechanism, such as a social

multiplier.

The second fact is that there are huge variations in the sickness-absence

rate among different geographical areas, even though the workers in these

areas participate in the same sick-pay insurance system. This is also the

case after controlling for differences in a number of socioeconomic factors,

such as demographic structure, population health indicators, and labor-

market conditions (see Lindbeck et al., 2009). For example, in 2001, the

average number of days on sick-pay insurance was 38.9 in the municipality

of Jokkmokk and 13.3 in the municipality of Mullsj¨

o. This raises the

suspicion that there is a large variation in local social norms, a phenomenon

that could be characterized as “local benefit-dependency cultures”.

1For theoretical analyses of the influence of social norms on individual behavior, see, for

instance, Parsons (1952), Bicchieri (1990), Manski (1993), Lindbeck (1995), and Lindbeck

et al. (1999).

CThe editors of The Scandinavian Journal of Economics 2015.