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Dismissal protection and long‐term sickness absence: Evidence from a policy change

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  • Nicole Gürtzgen
  • Karolin Hiesinger

Abstract

This paper studies whether a decline in employment protection reduces workers' long‐term sickness absences (of >6 weeks). We exploit exogenous variation from a German policy change that shifted the threshold exempting small establishments from dismissal protection from 5 to 10 workers. Using German register data, we find that the reform significantly reduced employees' transitions into long‐term sickness during their second year after being hired. This response is due to a behavioral rather than a compositional effect and is particularly pronounced among the medium‐skilled and younger males. Further results indicate that the reform did not alter the probability of involuntary unemployment after sickness.

Suggested Citation

  • Nicole Gürtzgen & Karolin Hiesinger, 2025. "Dismissal protection and long‐term sickness absence: Evidence from a policy change," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 64(3), pages 318-342, July.
    • Handle: RePEc:bla:indres:v:64:y:2025:i:3:p:318-342
    DOI: 10.1111/irel.12375
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