The individual cost of sick leave
This paper assesses the causal effect of sick leave on subsequent earnings and employment, using an administrative dataset for Norway to link individual earnings, sick-leave records and primary care physicians. To create an experiment-like setting where similar workers are given different sick-leave durations, the leniency of a worker's physician - certifying sickness absences - is used as an instrumental variable for sick leave. I find that a one percentage point increase in a worker’s sick-leave rate reduces his earnings two years later by 1.2 percent. Around half of the reduction in earnings can be explained by a reduction of 0.5 percentage points in the probability of being employed.
C31, J22, J24, J31, J33, J71
sickness absence, wage formation, IV estimation, wage regression