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Title:Identifying trend and age effects in sickness absence from individual data: Some econometric problems PDF Logo
Authors:Biørn, Erik
Issue Date:2010
Series/Report no.:Memorandum // Department of Economics, University of Oslo 2010,20
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.
Subjects:Sickness absence
health-labour interaction
cohort-age-time problem
self-selection
latent heterogeneity
bivariate censoring
truncated binormal distribution
panel data
JEL:C23
C25
I38
J22
Document Type:Working Paper
Appears in Collections:Memorandum, Department of Economics, University of Oslo

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