Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 660: Job Security and Work Absence: Evidence from a Natural Experiment

Assar Lindbeck (), Mårten Palme () and Mats Persson ()
Additional contact information
Assar Lindbeck: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Mårten Palme: Stockholm University, Postal: Department of Economics, SE-106 91 Stockholm, Sweden
Mats Persson: Institute for International Economic Studies, Postal: Stockholm University, SE-106 91 Stockholm, Sweden

Abstract: We analyze the consequences for sickness absence of a selective softening of job security legislation for small firms in Sweden in 2001. According to our differences-in-difference estimates, aggregate absence in these firms fell by 0.2-0.3 days per year. This aggregate net figure hides important effects on different groups of employees. Workers remaining in the reform firms after the reform reduced their absence by about one day. People with a high absence record tended to leave reform firms, but these firms also became less reluctant to hire people with a record of high absence.

Keywords: Seniority Rules; Sick Pay Insurance; Firing Costs; Moral Hazard

JEL-codes: H53; I38; J22; J50; M51

37 pages, February 14, 2006

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