The individual cost of sick leave
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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
Project:Oppdragsgiver: Norges forskningsråd
Frisch prosjekt: 1134 - A viable welfare state