Non-linear Unemployment Effects in Sickness Absence: Discipline or Composition Effects?

Abstract

By applying Smooth Transition Regressions (Teräsvirta, 1998) we test whether effects on short (STA) and long term (LTA) sickness absence depend on the level of unemployment. The main question is to what extent unemployment affects sickness absence through so-called discipline and/or composition effects. The empirical analysis is carried out on time series data referring to blue collar workers in Norway. For LTA we conclude that only discipline effects are present. Concerning STA, none of these e¤ects seems present among women, whereas both effects may be present among men. Non-linear effects of wage and sick pay scheme changes support these conclusions.