Earnings-Linked Incentives and Moral Hazard in Sickness Insurance: The Effects of First-Day Sick Leave Reimbursements

By: Thomas Crol

Sickness insurance is a primary policy lever to curb disease transmission. This project estimates how reimbursements for the first day of sick leave (i.e., temporary suspensions of karensavdraget) during the COVID-19 pandemic affected workers’ absenteeism and health across different earnings levels. These empirical estimates will be combined with a structural model to evaluate the welfare-optimal sickness insurance schedule. Ultimately, this structural evidence will be valuable for evaluating the efficacy of Sweden’s COVID-19 mitigation response and informing future pandemic preparedness.