Property rights, sick pay and effort supply

Abstract

Direct evidence on variations in work incentives across different property rights systems remains scarce. This paper examines absenteeism among individuals employed in worker cooperatives—firms that are ultimately controlled by their workforce. By leveraging employment data matched with sick leave records and reform-induced variation in the generosity of Uruguay’s statutory sick pay, we find 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.