Memorandum,
Oslo University, Department of Economics

Abstract: This paper assesses the causal effect of sick-leaves on subsequent earnings using an administrative dataset for Norway linking individual earnings, sick-leave records and primary care physicians. The leniency of a worker's physician - certifying sickness absence - is used as instrument for sick-leaves. Sick-leaves have a substantial impact on future earnings, reducing earnings by .3 percent per day of absence. When conditioning on full-time employment also two years after sickness the effect is .06 percent per day of absence. These effects are persistent over time and work mainly through wages not hours.

Keywords: sickness absence; wage formation; IV estimation; wage regression

JEL-codes: C31; J22; J24; J31; J33; J71

42 pages, June 30, 2009

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Memo-20-2009.pdf  

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