Scandinavian Working Papers in Economics
Memorandum,
Oslo University, Department of Economics
No 20/2010: Identifying Trend and Age Effects in Sickness Absence from Individual Data: Some Econometric Problems
Erik Biørn ()
Additional contact information
Erik Biørn: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Abstract: When using data from individuals who are in the labour force to disentangle the empirical relevance of cohort, age and time effects for sickness absence, the inference may be biased, affected by sorting-out mechanisms. One reason is unobserved heterogeneity potentially affecting both health status and ability to work, which can bias inference because the individuals entering the data set are conditional on being in the labour force. Can this sample selection be adequately handled by attaching unobserved heterogeneity to non-structured fixed effects? In the paper we examine this issue and discuss the econometric setup for identifying from such data time effects in sickness absence. The inference and interpretation problem is caused, on the one hand, by the occurrence of time, cohort and age effects also in the labour market participation, on the other hand by correlation between unobserved heterogeneity in health status and in ability to work. We show that running panel data regressions, ordinary or logistic, of sickness absence data on certain covariates, when neglecting this sample selection, is likely to obscure the interpretation of the results, except in certain, not particularly realistic, cases. However, the fixed individual effects approach is more robust in this respect than an approach controlling for fixed cohort effects only.
Keywords: Sickness absence; health-labour interaction; cohort-age-time problem; self-selection; latent heterogeneity; bivariate censoring; truncated binormal distribution; panel data
14 pages, December 18, 2010
Full text files
Memo-20-2010.pdf
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