Sickness insurance and spousal labour supply

Abstract

Analysing a reform in the Swedish public sickness insurance, we find that an increased replacement rate for one spouse has a negative cross effect on the other spouse's labour supply. The cross effects are present in the labour supply margins that workers can easily adjust. For wives of treated husbands, the total number of sick days increases on average 9.1% per month, whereas labour earnings are unchanged. The cross effect on total sick days for husbands to treated wives is 6.1% on average, with no effect on annual labour earnings. The total number of sick days and annual labour earnings for treated spouses are estimated to be unaffected by the reform, which indicates that the cross effects stem specifically from higher insurance coverage for the couples.