Dismissal protection and long-term sickness absence – first evidence from Germany

Gürtzgen, Nicole ; Hiesinger, Karolin

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URL: https://madoc.bib.uni-mannheim.de/57681
URN: urn:nbn:de:bsz:180-madoc-576814
Document Type: Working paper
Year of publication: 2020
The title of a journal, publication series: ZEW Discussion Papers
Volume: 20-040
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D02 , I12 , J28 , J38 , J88 , J63 , K31,
Keywords (English): dismissal protection , long-term sickness , involuntary unemployment , difference-in-differences , administrative data , small establishments
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.

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