Property Rights, Sick Pay and Effort Supply

Abstract

Direct evidence on how effort provision varies across property rights systems remains rare. This paper studies the absence behaviour of individuals employed in worker cooperatives, that is, in firms ultimately controlled by their workforce. Leveraging employment data matched with sick leave records and reform-induced variation in the generosity of the Uruguayan statutory sick pay, we show that absenteeism differentially increased for individuals affected by the policy change and employed in cooperatives. The effect is driven by co-op members, hard-to-diagnose (and, hence, more prone to moral hazard reporting problems) musculoskeletal conditions and large cooperatives. Conventional firms used dismissals more intensely than cooperatives as a threat to keep absenteeism in check after the reform.

Keywords: effort, absenteeism, sick pay, cooperatives, property rights, moral hazard.