, Volume 25, Issue 4, pp 1287-1306
Date: 26 Oct 2011

The individual cost of sick leave

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Abstract

This paper aims to estimate the causal effect of sick leave on subsequent earnings and employment, using an administrative dataset for Norway. To obtain experiment-like variation in sick leave among otherwise similar workers, the leniency of these workers’ physicians—certifying sickness absences—is used as an instrumental variable for sick leave. A 1 percentage point increase in a worker’s sick leave rate is found to reduce his earnings by 1.2% 2 years later. Around half of the reduction in earnings can be explained by a reduction of 0.5 percentage points in the probability of being employed.

Responsible editor: Erdal Tekin
This paper is part of the project “A viable welfare state” financed by the Norwegian Research Council. I am grateful to Knut Røed, Oddbjørn Raaum, Bernt Bratsberg, Espen Henriksen, Ole Røgeberg, Erik Biørn, Kjell Arne Brekke, Magne Mogstad, Harald Dale-Olsen and Per Johansson for their comments. I am also grateful to two anonymous referees for the comments and suggestions.