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Accident-Induced Absence from Work and Wage Ladders

Author

Listed:
  • Anikó Bíró

    (Centre for Economic and Regional Studies)

  • Márta Bisztray

    (Centre for Economic and Regional Studies)

  • João G. da Fonseca

    (Université de Montréal)

  • Tímea Molnár

    (Central European University and IZA)

Abstract
How do temporary spells of absence from work affect individuals’ labor trajectory? To answer this question, we augment a `wage ladder' model, in which individuals receive alternative takeit-or-leave-it wage offers from firms and potentially suffer accidents which may push them into temporary absence. In such an environment, during absence, individuals do not have the opportunity to receive alternative wage offers that they would have received had they remained present. To test our model's predictions and to quantify the importance of foregone opportunities to climb the wage ladder, we use linked employer-employee administrative data from Hungary, that is linked to rich individual-level administrative health records. We use unexpected and mild accidents with arguably no permanent labor productivity losses, as exogenous drivers of short periods of absence. Difference-in-Differences results show that, relative to counterfactual outcomes in the case of no accidents, (i) even short (3-12-months long) periods of absence due to accidents decrease individuals' wages for up to two years, by around 2.5 percent; and that (ii) individuals reallocate to lower-paying employers. The share of wage loss due to missed opportunities to switch employers is between 7-20 percent over a two-year period after returning to work, whereas at most 2 percent is due to occupation switches. Our results are robust to (a) instrumenting absence with having suffered an accident, (b) exploiting the random nature of the time of the accident, and (c) within-firm matching of individuals with and without an accident and subsequent absence spell.

Suggested Citation

  • Anikó Bíró & Márta Bisztray & João G. da Fonseca & Tímea Molnár, 2023. "Accident-Induced Absence from Work and Wage Ladders," CERS-IE WORKING PAPERS 2321, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:2321
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    1. Szabó, Lajos Tamás & Erdélyi, Levente, 2024. "Munkaerő-áramlás Magyarországon 2002-2021 között teljes körű adminisztratív adatok alapján [Labour force flows in Hungary 2002-2021 based on comprehensive administrative data]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 728-754.

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    More about this item

    Keywords

    Keywords: wage ladder; accidents; health shocks; temporary absence from work;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • I10 - Health, Education, and Welfare - - Health - - - General

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