On the Inverse Relationship between Unemployment and Absenteeism: Evidence from Natural Experiments and Worker Heterogeneity

21 Pages Posted: 6 Dec 2007

See all articles by Rene Fahr

Rene Fahr

University of Paderborn; IZA Institute of Labor Economics

Bernd Frick

University of Witten/Herdecke - Institute of Economics and Business Administration

Date Written: November 2007

Abstract

Although an inverse relationship between sickness absence and unemployment has been documented in a number of studies using either quarterly or annual data from different countries with varying institutional frameworks, it is not yet clear whether this empirical regularity is due to changes in the individual costs of absence when unemployment increases (incentive effect) or, alternatively, to changes in the composition of the workforce over the business cycle (selection effect). In order to provide evidence to evaluate the relative importance of both effects we first investigate the effects of changes in the unemployment benefit entitlement system with monthly absence data for East and West Germany for the years 1991-2004. Second, we analyze the impact of differences in the costs of unemployment on the annual absence rates of workers in different sickness insurance funds using state-level annual absence rates for the years 1993-2004. We find clear evidence in favor of an incentive effect.

Keywords: absenteeism, unemployment, selection effect, incentive effect, natural experiment

JEL Classification: J63, K31, M51

Suggested Citation

Fahr, Rene and Frick, Bernd, On the Inverse Relationship between Unemployment and Absenteeism: Evidence from Natural Experiments and Worker Heterogeneity (November 2007). IZA Discussion Paper No. 3171. Available at SSRN: https://ssrn.com/abstract=1039221

Rene Fahr (Contact Author)

University of Paderborn ( email )

Warburger Str. 100
D-33098 Paderborn
Germany
+49 5251 60 3692 (Phone)

HOME PAGE: http://www.quantitative-cg.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 38 94 0 (Phone)
+49 228 38 94 510 (Fax)

Bernd Frick

University of Witten/Herdecke - Institute of Economics and Business Administration ( email )

D-58448 Witten
Germany

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