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Absenteeism, Unemployment and Employment Protection Legislation: Evidence from Italy

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Abstract

Efficiency wages theories argue that the threat of firing, coupled with a high unemployment rate, is a mechanism that discourages employee shirking in asymmetric information contexts. Our empirical analysis aims to verify the role of unemployment as a worker discipline device, considering the different degree of job security offered by the Italian Employment Protection Legislation to workers employed in small and large firms. We use a panel of administrative data (WHIP) and consider sickness absences as an empirical proxy for employee shirking. Controlling for a number of individual and firm characteristics, we investigate the relationship between worker's absences and local unemployment rate (at the provincial level). We find a strong negative impact of unemployment on absenteeism rate, which is considerable larger in small firms due to a significantly lower protection from dismissals in these firms. We also find that workers who are absent more frequently face higher risks of dismissal. As an indirect test of the role of unemployment as worker's discipline device we show that public sector employees, almost impossible to fire, do not react to the local unemployment.

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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 257.

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Length: 38 pages
Date of creation: 07 Jan 2013
Date of revision: 07 Jan 2013
Handle: RePEc:rtv:ceisrp:257

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Keywords: Shirking; Absenteeism; Employment Protection Legislation; Unemployment.;

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Cited by:
  1. Nicolas R. Ziebarth, 2009. "Long-Term Absenteeism and Moral Hazard: Evidence from a Natural Experiment," SOEPpapers on Multidisciplinary Panel Data Research 172, DIW Berlin, The German Socio-Economic Panel (SOEP).

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