Dismissal Protection and Long-term Sickness Absence – First Evidence from Germany

55 Pages Posted: 17 Sep 2020

See all articles by Nicole Gürtzgen

Nicole Gürtzgen

ZEW – Leibniz Centre for European Economic Research

Karolin Hiesinger

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Date Written: 2020

Abstract

This paper analyses the causal effects of weaker dismissal protection on the incidence of long-term sickness (> six weeks). We exploit a German policy change, which shifted the threshold exempting small establishments from dismissal protection from five to ten workers. Using administrative data, we find a significantly negative reform effect on transitions into long-term sickness in the second year after a worker has entered an establishment. This response is due to a behavioural, rather than a compositional effect and is particularly pronounced among medium-skilled males. Our results further indicate that the reform did not alter the probability of involuntary unemployment after sickness.

Keywords: dismissal protection, long-term sickness, involuntary unemployment, difference-in-differences, administrative data, small establishments

JEL Classification: D02, I12, J28, J38, J88, J63, K31

Suggested Citation

Guertzgen, Nicole and Hiesinger, Karolin, Dismissal Protection and Long-term Sickness Absence – First Evidence from Germany (2020). ZEW - Centre for European Economic Research Discussion Paper No. 20-040, Available at SSRN: https://ssrn.com/abstract=3693679 or http://dx.doi.org/10.2139/ssrn.3693679

Nicole Guertzgen (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Karolin Hiesinger

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

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