Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2015:28: The strength of the weakest link: sickness absence, internal substitutability and worker-firm matching

Lena Hensvik () and Olof Rosenqvist ()
Additional contact information
Lena Hensvik: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Olof Rosenqvist: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: We study how employee sickness absence affects worker-firm matching. We build on the idea that firms are sensitive to absence in jobs with few substitutes (unique positions). Consistent with this, we show that unique employees are less absent conditional on individual characteristics, establishment fixed effects and detailed occupational information. Half of this association is explained by sorting of low-absence workers into unique positions but sorting is less pronounced under imperfect information. Finally, job separations respond more to realized sickness absence in unique positions. The findings suggest that the cost of production disruptions is an important aspect of firms’ hiring choices.

Keywords: Sickness absence; production disruption; coworker substitutes; hiring strategies

JEL-codes: J23; J24; L23; M51

40 pages, November 23, 2015

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