Absenteeism and Peer Interaction Effects: Evidence from an Italian Public Institute

Transcription

1 MPRA Munch Personal RePEc Archve Absenteesm and Peer Interacton Effects: Evdence from an Italan Publc Insttute Mara De Paola Unversty of Calabra, Department of Economcs and Statstcs 7. October 2008 Onlne at MPRA Paper No , posted 8. November :08 UTC

2 1. Introducton A number of emprcal studes argue that absenteesm s a serous problem n many countres. Barmby, Ercolan and Treble (2002) show that sckness absence rates range from 1.78 for Swtzerland to 6.31 for Sweden. There s also emprcal evdence that publc sector workers are usually more prone to takng sck leaves compared wth smlar employees workng n the prvate sector (Wnkelmann, 1999; Banerjee, Duflo, 2006). In Italy, as frequently lamented n the press (for example Correre della Sera, Agu 24 th 2006; Dec 4 th 2007; Sole24Ore, Mar 3 rd 2008, Apr 16 th 2007; The Economst, Agu 28 th 2008), dfferences between prvate and publc sector absenteesm are mpressve: data from the Italan Economc Mnstry (Ragonera Generale dello Stato) show that n year 2006 the Italan publc sector employees took 11 days off due to sck-leave, from 30% to 50% more than ther prvate sector counterparts (accordng to a note of the publc-admnstraton mnster Brunetta) 1. Publc sector absenteesm produces drect and ndrect costs: the publc admnstraton sustans the costs of wage payment to the absent workers and n many cases t has to pay the wage costs due to ther substtutes (for example, n publc schools, temporary contracts are used to hre teachers replacng absent workers); ndrect costs also play an mportant role, especally n terms of adverse effects on the qualty of servces offered. In a recent speech, the leader of the Italan employers federaton (Confndustra), Montezemolo, clamed that absenteesm n the Italan publc sector costs the taxpayer the equvalent of one pont of GDP. In spte of the magntude of the phenomenon, also due to the lack of sutable data, lttle economc research has been conducted to understand the determnants of absenteesm among publc sector employees. As suggested by prevous studes, absenteesm can be related ether to health factors or to shrkng behavour. Beng able to dsentangle these aspects and to dstngush between voluntary absence and nvoluntary absence s a crucal pont to desgn adequate polcy responses to absenteesm. In fact, the rght to absence when sck s a central part of the 'contract' between employer and employee, and those who are off work, sck, have the rght to expect senstve treatment and support. On the other hand, snce t s often very costly to ascertan ndvdual health condton, people may be tempted to assume opportunstc behavours takng days off also when they are not genunely sck, mposng n ths way 1 Self reported data from the Bank of Italy s Survey of Household Income and Wealth (SHIW) pont at a dfference between absence rates n the prvate and publc sector of 20%. Accordng to other sources ths dfference s much hgher, for example Gacalone (2008) argues that absenteesm s four tmes hgher n the publc sector than n prvate companes. 1

3 consderable costs on the organzaton employng them 2. As a consequence, beng able to dentfy drvers for absence frequency and to take the necessary actons would permt publc admnstratons to save large amounts of money 3. However, t s generally dffcult to dsentangle absence due to shrkng behavour from genunely sckness leaves. Recently, some authors (Ichno, Magg, 2000; Bradley et al., 2007) have looked at the exstence of peer effects on ndvdual absences as an ndcator of shrkng behavour. A postve relatonshp between ndvdual absenteesm and peer group absenteesm would suggest that absence s more lkely to be due to shrkng rather than to sckness. In ths study we follow a smlar approach n tryng to understand whether shrkng behavour plays a relevant role n shapng absence rates of publc sector employees. We use a unque dataset on a sample of 329 workers, whch are employed at the Italan Natonal Socal Securty Insttute, INSSI, (Isttuto Nazonale della Prevdenza Socale). More precsely our data concern 8 unts of the INSSI located n a provnce of the South of Italy. We explan absence rates both consderng varables that may be related to ndvdual health condtons and to varables that may hde shrkng behavour. Among these varables we especally focus our attenton on the nfluence produced by socal nteractons and group behavour. Whle many other works on ths subject rely on measures of absence that are based upon selfreported absence nformaton, we have very accurate admnstratve data. Ths allows us to avod problems related to msreportng 4 and to provde a very relable analyss on the determnants of absenteesm n the publc sector, whch s partcularly relevant gven the lttle statstcal work avalable on the subject. The frst part of the paper s devoted at analysng the determnants of publc sector workers absenteesm, focusng on personal and job characterstcs. We show that a number of varables, whch are typcally not related to ndvdual health condton, such as contractual form and agency sze, are relevant n determnng absence rates. Ths frst evdence suggests that sckness absence s at least partally due to shrkng behavour. In the second part of the paper, we nvestgate group nteracton effects on absenteesm. More precsely, we analyse how the absence rate of employees s affected by the absenteesm behavour of co- 2 Psychologcal theores suggestng that absenteesm may enhance effcency by provdng workers n stressful stuaton wth a temporary relef (Steers and Rhodes, 1978), do not seem relevant when absenteesm becomes such a dffuse phenomenon as n the Italan publc sector. 3 Renato Brunetta, the publc-admnstraton mnster of the current Italan government, has recently (August 2008) mposed by decree a rule that, after the second absence n any year, only medcal certfcates ssued by the publc health servce wll be acceptable. In addton he has ntroduced productvty bonuses based n part on attendance records. Our data, concernng absences n 2007, do not allow to analyse the effect of ths polcy nterventon. 4 For example, Johns (1994) reports that employees tend to be absent more than twce as often as ther self-reports ndcate and ndvduals wth hgher actual absences tend to be more naccurate n ther self-reports than ndvduals wth lower actual absence. 2

4 workers. We consder employees workng n the same dvson as the relevant sphere of socal nteracton: on the one hand these workers are requred to cooperate and communcate among them and by ths way they contrbute to the shapng of ther workng envronment, on the other hand they nteract on daly bass and tend to establsh frendly relatonshps. Then, for each worker we consder as members of hs/her peer group all the workers employed n the same dvson and peer absence behavour s calculated as the average of absence rates of ndvduals n the group. As t s well known n the economc lterature (Mansk, 1993), emprcal analyses tryng to detect peer group effects face two man problems: one s related to the fact that ndvduals generally choose ther peers (self-selecton problem) and the choce can be related to unobservable ndvdual factors; the other, known as reflecton problem, emerges because members of the same group undertake nterdependent behavours, n our case the shrkng behavour of each member affects shrkng of all other members, but at the same tme t s nfluenced by how all other members behave. Dfferent strateges have been adopted to overcome these problems: some works rely on stuatons n whch peers are randomly assgned (for example Sacerdote, 2001; Zmmermann, 2003); other analyses use an nstrumental varable approach tryng to dentfy exogenous determnants of peer groups (Case and Katz, 1991; Gavra and Raphael, 2001; Hanushek et al., 2003); some authors add group specfc fxed effects (when more than one observaton for group s avalable) to control for correlated unobservables. Self selecton problems are not a major concern n our analyss as our sample employees are not able to choose among dfferent dvsons or even among dfferent unts. In order to obtan a job at the Italan Natonal Socal Securty Insttute t s necessary to wn a natonal competton. Once the job has been obtaned the assgnment to dfferent unts and wthn the same unt to dfferent dvsons s related to the partcular needs of the Insttute 5. Employees durng ther career can change dvsons due to career advancements, but also n ths case the procedure s very formal and t s necessary to pass a competton for any place that becomes vacant. Only n very specal cases workers can ask to change dvson, but the head of the personnel offce explaned us that ths s very unusual and the few demands that were presented over tme were all rejected. To deal wth reflecton problems we use Two-Stage Least Squares estmaton and nstrument peer absences wth the percentage of females n the dvson. We ponted at ths partcular predetermned feature of peer groups, snce accordng to our analyss the gender varable has a strong mpact on absence behavour, whle other personal characterstcs play a mnor role. Ths varable should not drectly affect ndvdual absence rate, but may have a relevant mpact on peer absenteesm. To be more concrete, we do not expect that workng n a dvson characterzed by a greater female presence drectly affects the ndvdual decson to be absent, but t may nfluence one s propensty to be absent manly through the ncreased probablty that one s peers are absent. 5 Ths nformaton has been provded by the head of the personnel offce. 3

5 From our analyss t emerges that absenteesm s strongly nfluenced by peer group effects and that workplace absence norms produce a relevant effect on ndvdual shrkng. In our Instrumental Varable preferred specfcaton, we fnd that an ncrease of one standard devaton n peer group absence rate produces an ncrease n ndvdual absence rate of 0.28 standard devatons (the OLS estmates show a smaller coeffcent equal to 0.16). As the hgher absence rates observed n certan dvsons may also be due to a contagon effect, we have tested the socal nteracton assumpton analysng the effect produced by peer absences due to famly-study leaves on ndvdual sckness absences. From our analyss t emerges that ndvduals whose peers have hgher absence rates due to famly-study leaves tend to be more often absent due to sckness reasons, gvng support to the dea that the hgher absenteesm observed n certan dvsons s lkely to be due to socal nteracton effects rather than to contagon effects. The paper s organzed as follows. Secton two dscusses the related lterature. In secton three data are presented and some descrptve statstcs are offered. In secton four we estmate a smple OLS model to examne the effect of a number of personal and job characterstcs on absenteesm. Secton fve nvestgates peer group effects and presents both OLS and 2SLS estmates. Secton sx concludes. 2. Related Lterature An ncreasng economc lterature s devotng attenton to absenteesm and many papers have analysed ts determnants and costs. Browns and Sessons (1996) n ther survey of the relevant theoretcal and emprcal research, dscuss a large number of works, whch hghlght the nfluence of many varables on absenteesm. Some of these varables are related to health factors (nabltes, gender, workng condtons, etc), whle others are related to ncentves and contractual aspects (the avalablty of sckness benefts, employment protecton, frm sze, labour market condtons) or to job satsfacton and absence culture. However, t s often dffcult to dstngush among them, snce some factors that may nfluence health condtons, may also be related to the employee shrkng behavour. For example, the gender effect may be due to bologcal dfferences between men and women, but t may also be related to dfferences n shrkng propensty (see Ichno and Morett, 2008). Dfferent strateges have been adopted n order to try to dsentangle absences due to shrkng behavour. An early approach followed n the economc lterature (Audtor General, 1997; Imants and van Zoelen, 1995) was based on the analyss of absence spell length: absence perods exceedng a gven number of days were generally consdered as nvoluntary and only shorter epsodes were expected to be nfluenced by motvatonal and shrkng varables. But crtera based on absence length are not free from 4

6 crtcsms: as suggested by Drver and Watson (1989), they may produce unrelable predctons, snce a long spell absence could be as voluntary as short spells and sequences of short absence spells may be due to recurrng sckness nstead of beng related to shrkng behavour. Other works, based on the prncpal-agent theory, have nvestgated the relatonshp between absenteesm and varables such as ncentves, montorng and frng costs, labour market condtons. From some of these works t emerges that employees have reduced rates of absenteesm when they experence a wage decrease upon absence, mplyng that shrkng behavour s nfluenced by the ncentve structure. (Barmby et al. 1995, Johansson and Palme, 1996; Henrekson and Persson, 2004; Hassng and Konng, 2005). In addton, a number of emprcal analyses shows that absence rates ncrease when montorng costs ncrease. For example, Wnkler (1979) and Wnkelman (1999) show a negatve relatonshp between frm sze and absence rates, whch can be explaned n relaton to the hgher montorng costs faced by larger frms. Other works have analysed the relatonshp between frng costs and absence behavour (Ichno and Rphahn, 2005; Engellandt and Rphahn, 2005; Ara and Thourse, 2005). They fnd that temporary workers and workers on probaton are less lkely to be absent and show lower absence rates. These results can be nterpreted consderng that shrkng s partcularly costly for these workers, snce they work under contractual arrangements characterzed by less severe frng restrctons. As far as labour market condtons are concerned, the emprcal lterature hghlghts that absenteesm s nversely related to the unemployment rate (Legh, 1985). Accordng to the standard effcency wage model (Shapro and Stgltz, 1984), ths may depend on the fact that the threat of beng fred, f the employee s dscovered to shrk, s more effectve when unemployment s hgh. 6 Partcularly relevant for ths paper are some recent works examnng peer group effects on ndvdual shrkng behavour. Group nteracton effects have been extensvely studes n relaton to educatonal outcomes and socal phenomena, such as crme, alcohol, drug use, etc. (Case and Katz, 1991; Sacerdote, 2001; Gavra and Raphael, 2001; Kremer, 2008). As regards shrkng, these knd of effects can operate among co-workers va dfferent mechansms manly based on montorng and stgma channels: n fact, both peer montorng and stgma are lower when shrkng represents a dffuse and acceptable behavour. Followng ths type of reasonng, Ichno and Magg (2000), n a paper studyng regonal absenteesm dfferentals wthn a large Italan bank, show that peer group nteracton effects play a relevant role n explanng these dfferentals. A smlar result has been obtaned by Bradley et al. (2007) analysng the mpact of group nteractons on the absence behavour of prmary and secondary school teachers. 6 However, t s worthwhle to say that the negatve relatonshp between unemployment rate and absences may also depend on employers dsmssal decsons. If employer can choose whom to lay-off, workers wth hgher absence rates wll be those who are fred frst n a recesson, ths results n a change n workforce composton over the busness cycle (Ara and Thourse, 2004). 5

7 3. Insttutonal framework, data and descrptve statstcs Our analyss uses personnel data obtaned from 8 unts of the Italan Natonal Socal Securty Insttute (INSSI). These unts are located n a Southern Italan provnce and employ 329 workers. Our data refer to year 2007 and offer detaled nformaton on a number of personal characterstcs (such us gender, number of sons, place of resdence, educaton, age, number of hours contracted to work, tenure, wage etc.), on a number of work-place characterstcs (such as place of work, unt-sze, occupatonal codes, work dvson etc) and on dfferent measures of absence (absence due to sckness, absence due to famly-study leaves, tme off due to the partcpaton to unon assembles, leaves to blood donors and leaves to persons wth dsabltes or to ndvduals wth famly members who have a handcap). We focus our attenton manly on absences due to sckness. However, we also provde some descrptve statstcs consderng the other measures of absenteesm we have at hand. Accordng to the Natonal Collectve Employment Contract of publc sector workers (C.C.N.L) absences for sckness must be justfed by a doctor s certfcate (wthn the frst two day of sckness). The employer can ask for an addtonal offcal medcal check, whch has to be performed by doctors who are not chosen by workers, but autonomously apponted by subjects nvolved n montorng sck absences. However, snce health condtons are dffcult to ascertan even for competent doctors, sckness absence may hde shrkng behavour. Ths also because employees are generally fully-nsured aganst earnng losses due to sckness, and as a consequence they may be nduced to take days off and obtan ther wage wthout provdng any effort. Ths aspect s partcularly relevant for the workers consdered n ths study, snce Italan publc sector employees, untl August 2008, were enttled to full replacement of wage ncome (ncludng all allowances or emoluments of a fxed, contnuatve nature and all other ancllary economc benefts ) for the frst nne months of sckness 7. Our data-set does not provde nformaton on absence spell length and for each type of absence, we only have nformaton of the total number of hours the worker has been away from work durng the year The measure of absence we use s the rato of the number of hours absent to the number of hours contracted to work. As n Barmby et al. (1999) and Barmby et al. (2002) we defne the absence rate R as the rato of the total number of hours of absence (due to sckness, to study-famly leaves etc.), A, 7 A note sgned n June 2008 by the mnster (approved by decree n August 2008), Renato Brunetta, to all branches of the publc admnstraton, ponts out that offcal medcal checks are always mandatory. For each perod of llness, the frst days of absence wll ncur a reducton n pay, regardless of duraton, although not all elements of salary wll be affected. Cuts wll apply to all allowances or emoluments of a fxed, contnuatve nature and all other ancllary economc benefts. In addton, productvty bonuses wll be earned only n proporton to work actually performed and the results acheved. 6

8 recorded by the admnstratve offce n year 2007, to the total number of contracted hours, T, for the same year, then: R = A / T 8. Table 1 reports absence rates consderng dfferent measures of absence based on dfferent type of leaves. The average absence rate due to sckness s of about 5%, correspondng to an average of about 12 days of sck leave. The absence rates due to famly-study leaves and related to handcaps are also qute hgh, respectvely 2.7% and 2%, whle the absence rates due to other causes are neglgble. The total absence rate s on average of 10.5%, whch corresponds to 25 days off work durng the year. These descrptve statstcs show the exstence of a substantal amount of heterogenety n the absenteesm behavour of workers. On average, 22% of them are never absent due to sckness reasons, whle at the opposte end of the dstrbuton, 10% of our sample employees accumulate more than 22 days of absence over the year. Sharper dfferences emerge when we consder absences due to famly-study reasons: 32% of workers never take ths type of leave, whle workers n the top 10% of the dstrbuton show about 50 days of absence. When we look at the total absence rate t emerges that only about 8% of workers are never absent, workers n the lower 50% of the dstrbuton show on average a total absence rate of 2%, whle those n the upper 50% of the dstrbuton present an average total absence rate of 18%. Table 1. Absence rates Absence Rate Mean Std. Dev. Mn Max Leaves due to llness Famly and study Leaves Leaves due to unon actvtes Leaves to blood donors Leaves related to handcaps Total leaves In Table 2 we report some descrptve statstcs on the employees subject to ths study. They are on average n ther fftes, about 50% of them are female and 36% have obtaned a unversty degree. 81% of workers have at least one son, whle the average number of sons s of Unfortunately we do not have nformaton on the age of sons. Table 2. Summary Statstcs Mean Std. Dev. Mn Max Observatons Female Unversty Degree Number of sons However, snce 95% of the employees have the same number of contracted hours, ths measure s not very dfferent from that based on the total number of absence hours. 7

9 Age Age^ Dummy for workers travellng to work Km dstance from workplace Dummy for resdence n a dfferent provnce Tenure Yearly Gross Wage Dummy for employees hred n year Dummy for dvson manager Unt sze Dvson sze Dvsons sharng the same supervsor Blood donors Unon Handcap Peer-absence rate due to sckness About 47% of workers lve n the same town n whch the unt employng them s located; on average the dstance from the place of resdence to the workplace s of 28 klometres. The 3% of the sample workers have been hred n 2007 and, accordng to Natonal Collectve Employment Contract of publc sector employees, for the frst sx months after hrng were on probaton 9. It s worthwhle to notce that durng ths perod the employer s allowed to dsmss the worker wthout reason or warnng. As far as occupatonal varables are concerned, the workers we consder are manly employed n admnstratve jobs, whch can be classfed along three man levels: at the lower occupatonal level s employed the 13% of the workers, 75% of workers have a job classfed at the ntermedate level, whle 12% of them have a top level job. The average tenure s of 20 years and the average yearly gross wage s of about 38,400 euros. 73% of the sample workers are employed n a large unt (employng 243 workers), whle the remanng work n small unts wth an average sze of 15 workers. Wthn the same unt workers are organzed along dfferent dvsons. The average sze of a dvson s of 13 employees. Each dvson generally deals wth a partcular type of actvty, for example famly support, ncome support, selfemployed pensons etc. Tasks managed by employees of dfferent dvsons are qute smlar. 10 We consder as peers of employee all the workers employed n the same dvson n whch ndvdual s employed. The peer average absence rate s of 5.3%, rangng from 0 to 13.5%. Usng data from leaves due to unon actvty partcpaton and blood donatons we have defned two dummy varables, Unon and Blood_donors, takng value one when workers have obtaned leaves 9 The Italan legslator set an upper lmt to the length of probatonary perods at the begnnng of a labour contract of sx months. Ths s also the length of probaton establshed for publc sector employees. 10 The smaller unts are not always organzed along dvsons and n these cases the unt s treated as a dvson. 8

10 motvated respectvely by unon actvty partcpaton and by blood donatons. Smlarly, we nfer nformaton on personal or famly dsabltes from the nformaton we have on leaves due to these reasons and defne a dummy Handcap takng value one when the worker has obtaned ths knd of leave. It emerges that 19% of workers have obtaned leaves n relaton to personal or famly dsabltes, whle 30% of them have partcpated to some unon actvty and 4% of them are blood donors. As far as peers are concerned we choose dvsons as the relevant sphere of nteracton. As a consequence, we consder 3. The Effect of Personal and Job Characterstcs on Absence Rates In ths secton we analyse the effect of personal and job characterstcs on publc sector absenteesm, focusng on absences due to sckness. The dependent varable, R A / T = and as a log-odds rato ln[ /(1 R )] R, snce the dstrbuton of F, s formulated n two ways: as the rato R s not normal, beng restrcted between 0 and 1 and wth a mass on We then estmate by OLS the followng smple model: [1] F α P + J + D + ε = k where P s a vector of ndvdual characterstcs, J s a vector of job characterstcs and D k s a dummy varable to capture unobserved unt effects, wth k = Table 3 reports estmates of Eq. (1). In all specfcatons, standard errors (reported n parentheses) are corrected for heteroskedastcty. Snce the treatment s occurrng at the dvson level, we cluster standard errors at ths level to correct for seral correlaton wthn dvsons across tme. All varables have been standardzed to render the nterpretaton of margnal effects more straghtforward. The man personal characterstcs we consder are: sex, age, educaton, number of sons, a dummy for employees travellng to work 12 and a dummy for those whose resdence s dfferent from the provnce n whch the unts provdng data are located. Among the job features, we observe: tenure, yearly gross wages, unt sze and a dummy varable for workers who n 2007 were under probaton. In columns (1) and (2) are reported OLS estmates, ncludng unt fxed effects, when we consder as dependent varable respectvely the absence rate due to sckness R and ln[ /(1 R )] R. 11 We have used the approxmaton ln[ 0 /(1 0) ] = 5. 8 to account for the ndetermnacy of the extreme of the dstrbuton. 12 In an alternatve specfcaton we control for the dstance to workplace, but results reman substantally unchanged. 9

11 The dummy female s postve and statstcally sgnfcant n both specfcatons (respectvely at 5% and at 1% level n the two specfcatons) mplyng that female employees are more absent from work. Ths result can be related ether to the gender dvson of household work, to a weaker attachment to work of females (Vscus, 1980; Legh, 1983) or to bologcal dfferences between males and females (Ichno and Morett, 2008). 13 Age produces a postve effect on absenteesm due to sckness, whch may be due to the fact older ndvduals tend to have worst health condtons or to be less attached to ther job. As t s possble to see n columns (1) and (2) the effect s statstcally sgnfcant (at 10% level) only when we measure our dependent varable wth the absence rate R. We have also consdered the possblty of a non-lnear relatonshp between age and absenteesm by ncludng an age squared term n our regressons. The quadratc term shows the expected negatve sgn, but t s statstcally sgnfcant only n the frst specfcaton (at 10% level). The number of sons has a negatve but not statstcally sgnfcant effect. The negatve coeffcent shown by ths varable can be due to the fact that n the Italan publc sector, employees can use specal leaves for famly needs. 14 Employees wth a unversty degree have a lower propensty to be absent due to sckness reasons, however, the effect s not statstcally sgnfcant n both specfcatons 15. Table 3. The effects of personal and job characterstcs on absence rates. OLS estmates R = A / T ln[ R /(1 R )] R A / T ln R /(1 R ) Female 0.299** (0.126) Unversty Degree (0.124) Number of sons (0.027) Age 0.659* (0.334) Age^ * (0.379) Dummy for employees travellng to work (0.125) Dummy_dfferent_ provnce (0.207) Tenure (0.098) 0.486*** (0.109) (0.109) (0.037) (0.404) (0.432) (0.107) (0.367) (0.096) 0.258** (0.126) (0.122) (0.028) 0.631* (0.314) * (0.356) (0.126) (0.201) (0.099) = [ ] 0.446*** (0.106) (0.109) (0.035) (0.387) (0.411) (0.111) (0.371) (0.090) 13 However, snce the female dummy s postve and statstcally sgnfcant also when we consder measures of absences that are not related to health condtons, for example absence due to famly or study leaves, the hgher absenteesm of females cannot be exclusvely related to bologcal aspects. 14 In fact, when we consder the total absence rate or the absence rate due to famly and study leaves t emerges that employee wth sons have a hgher rate of absence. 15 The negatve mpact of an hgher level of educaton on absenteesm may be related to the fact that better educated ndvduals tend to devote more attenton to health problems and to preventon schemes or t may be due to motvatonal ssues, snce more educated people generally perform better jobs, whch are usually assocated wth a hgher degree of job satsfacton. 10

12 Yearly Gross Wage * (0.065) ** (0.025) * (0.061) ** (0.048) Probaton *** (0.200) *** (0.190) *** (0.188) *** (0.192) Unt sze 0.292*** (0.049) 0.327*** (0.065) 0.280*** (0.049) 0.314*** (0.067) Handcap 0.261* (0.041) 0.380*** (0.125) Unon (0.119) (0.127) Blood donors (0.177) (0.248) Constant * ** * *** Observatons R-squared Standard errors (corrected for heteroskedastcty) and ncorporatng clusterng grouped by dvson are reported n brackets. The symbols ***, **, * ndcate that coeffcents are statstcally sgnfcant, respectvely, at 1, 5, and 10 percent levels. Nor the dummy varable for ndvduals travellng to the workplace nether that for beng resdent outsde the provnce n whch the unts we consder are located show a statstcally sgnfcant effect. As far as job characterstcs are concerned, from our estmates t emerges a negatve relatonshp between yearly gross wage and absenteesm, whch s statstcally sgnfcant n both specfcatons (respectvely at 10% and 5% level). An ncrease of one standard devaton n yearly gross wages produces a reducton of the absence rate gong form 0.11 to 0.14 standard devatons, accordng to the specfcaton. Smlar results are been found by Drago and Wooden (1992) and Chaudhury and Ng (1992), whle Legh (1991) fnds no mpact of wages and pad sck leave on ndvdual absenteesm. 16 On the other hand, once we control for wages and age, tenure does not produce any statstcally sgnfcant effect. In addton, t emerges that the sze of the unt s relevant for employees absence behavour and an ncrease n the unt sze produces an ncrease n the rate of absence. The effect s statstcally sgnfcant n both specfcatons at 1% level. Ths corroborates prevously reported fndngs. For example Wnkelmann (1999) fnds that workers n large frms (wth 201 to 2000 employees) have 1.8 more absence days than workers n smaller frms (wth 21 to 200 employees). Fnally, from our analyss t emerges that employees who n year 2007 where on probaton take sgnfcantly fewer days of absences than ther colleagues (the effect s statstcally sgnfcant n both specfcatons at 1% level). Ths s n lne wth fndngs obtaned by works nvestgatng the relatonshp between employment protecton legslaton and workers shrkng behavour. For example, Ichno and Rphahan (2005), analysng the behavour of the employees of a large Italan bank durng and after probaton fnd that absenteesm s sgnfcantly lower durng the probatonary perod. 16 We have also expermented ncludng among regressors a dummy varable for employees who are dvson manager. The effect s negatve but statstcally nsgnfcant, whle no other substantal effects emerge. 11

13 In column (4) and (5) we have ncluded among regressors the dummy varables Handcap, Unon and Blood_donors. As expected, t emerges that absence s hgher among persons wth dsabltes or ndvduals wth famly members who have a handcap (the effects s statstcally sgnfcant at 10% and 1% level accordng to the specfcaton). Beng a blood donor produces a negatve but statstcal nsgnfcant effect on absence rates. Fnally, beng nvolved n unon actvtes produces an ambguous effect snce the sgn of the dummy varable Unon changes from negatve to postve accordng to the measure of absence adopted (t s never statstcally sgnfcant). The pseudo R2 measures are low n all specfcatons, but they are comparable wth those found n other studes (eg., Allen, 1981, and Barmby and Treble, 1991). Overall, the estmates are generally well defned and of the expected sgn. 4. Peer effects on absence behavour In ths secton we examne the effects produced by group nteractons on ndvdual absence behavour. We frstly descrbe our econometrc methodology and then we present both OLS and 2SLS estmates Emprcal Methodology Our analyss s now devoted at establshng whether the ndvdual absence rate s affected by the absence behavour of hs peers. The defnton of the relevant sphere of nteracton poses a number of problems, snce t s not clear whether ndvduals are manly nfluence by ther frends, by people from ther place of resdence, or by co-workers. Our defnton of peer group s based on workers employed n the same dvson. We thnk that subjects workng together, nteractng on daly bass, tend to establsh frendly relatonshps and as a consequence the dvson n whch the employee works may represent the relevant sphere of nteracton. Our emprcal specfcaton follows Case and Katz (1991) and Gavra and Raphael (2001). We extend the smple model represented by equaton [1] as follows: [2] F α P + J + D + A + ε = K 12

14 where A s the average ncdence of absenteesm among co-workers of ndvdual. More precsely peer absence behavour s calculated as the average of absence rates of workers employed n the same dvson employng worker : A 1 = N N d Fn d n= 1 where F n measures absences of ndvdual n workng n dvson d wth subject and N d s the number of peers n the dvson d. Accordng to the specfcaton proposed n equaton [2], the absence behavour of ndvdual s nfluenced by the behavour of hs/her peers, but t s not drectly affected by the average predetermned characterstcs of hs/her peer group, P, whch are assumed to affect hs/her absences only ndrectly through peer nteractons. The estmaton of equaton [2] poses a number of econometrcs problems. Frst, we have to deal wth the so-called reflecton problem, n fact on the one hand the average behavour of peers nfluences ndvdual behavour, but on the other hand ndvdual absence behavour also affects group absenteesm. Second, employees may sort accordng to some personal unobservable characterstcs n dfferent dvsons generatng relevant endogenety problems. Thrd common shocks or correlated effects may nfluence ndvduals belongng to the some group. For example, n our case, certan dvsons may nvolve more unpleasant tasks. We are confdent that the second bas s not relevant for our estmates snce, as explaned n detal n secton one, the assgnment of workers to dvsons depends exclusvely on the needs of the INSSI. Indvduals are assgned to a dvson nstead than to another at the begnnng of ther career n relaton to the openng of a vacancy n that partcular dvson, due for example to the retrement decsons of older workers, etc. Employees are not able to choose and the assgnment s random condtonal on the fact that the employee meets some formal requrements, generally n terms of level and type of educaton acqured 17. Durng ther career employees can move from a dvson to another only n very specal cases, defned by a law 18. Accordng to the head of the personnel offce these cases are extremely rare. The correcton for the second source of bas s based on the assumpton that contextual effects are not relevant and, as a consequence, there s no drect relatonshp between subject s absence behavour and the average pre-determned characterstcs of hs/her co-workers, P. These varables should not produce a drect nfluence on the absence behavour of ndvdual, but may have a relevant mpact on peer absenteesm. In fact ndvduals workng n a dvson characterzed by a greater female presence or by a larger proporton of graduate colleagues should not be drectly nfluenced by these aspects n ther absence decsons, whle they may result ndrectly affected snce these pre-determned peer group characterstcs tend to nfluence peer group absences. 17 The Italan law offers a hgh level of protecton n terms of equal opportuntes among dfferent types of workers. 18 Regolamento organco del personale, November

15 We have expermented usng dfferent set of average pre-determned peer characterstcs, however only the proporton of females n the dvson turns out to be relevant n explanng peer average absence behavour. Then, we have nstrumented peer absence behavour wth the proporton of females n the dvson. We thnk that, snce contextual effects should not be relevant n our case, ths nstrument, f, comply wth the usual condtons: the nstrument s correlated wth the endogenous varable, ( Peer _ absence _ rate, f ) 0 Cov and t does not affect drectly ndvdual absence behavour ( f, ε ) = 0 Cov. The use of the proporton of females as an nstrument also helps at avodng problems dervng from common shock bas. In the next secton we present both OLS and 2SLS estmates of equaton [2] OLS and 2SLS Estmaton Results Table 4 presents OLS estmates of alternatve specfcatons of our model consderng as dependent varable R A / T = and ln[ /(1 R )] R. In estmates shown n columns (1) and (2) we have not ncluded among our controls the three dummy varables Handcap, Unon, Blood_donor. It emerges that, controllng for personal and job characterstcs, peer effects appear postve and sgnfcant. An ncrease n the absence rate of the peer group of ndvdual leads to an ncrease n hs absenteesm. As shown n column (1) an ncrease n peer absence rate of one standard devaton leads to an ncrease n ndvdual absence rate of 0.16 standard devatons. The coeffcent s sgnfcant at 5% level. A postve and statstcally sgnfcant effect (at 5% level) emerges also when we measure the dependent varable usng ln[ /(1 R )] R. No relevant changes are observed when we nclude among regressors addtonal controls for unon partcpaton, blood donatons and handcaps (columns 3 and 4). 19 Table 4. OLS regressons relatng ndvdual absenteesm to peer group behavour R = A / T ln[ R /(1 R )] R A / T Peer absence rate 0.161** (0.069) Female 0.287** (0.127) Unversty Degree * (0.121) Number of sons (0.022) Age 0.527* (0.267) ** (0.087) 0.466*** (0.105) (0.107) (0.036) (0.408) = ln[ R /(1 R )] 0.157** (0.069) 0.245** (0.109) * (0.118) (0.022) 0.513** (0.247) 19 The other explanatory varables have approxmately the same level of sgnfcance as n Table ** (0.086) 0.437*** (0.104) (0.106) (0.034) (0.392)

16 Age^ * (0.328) (0.446) (0.305) (0.425) Dummy for employees travellng to work (0.129) (0.111) (0.130) (0.114) Dummy_dfferent_ provnce (0.224) (0.391) (0.214) (0.394) Tenure (0.096) (0.087) (0.099) (0.085) Yearly Gross Wage * (0.061) ** (0.050) * (0.058) ** (0.043) Probaton *** (0.178) *** (0.233) *** (0.179) *** (0.253) Unt sze 0.186*** (0.069) 0.194** (0.087) 0.174** (0.072) 0.191** (0.089) Handcap 0.239* (0.139) 0.354*** (0.117) Unon (0.117) (0.116) Blood donors (0.178) (0.255) Constant *** *** Observatons Number of clusters R-squared Standard errors (corrected for heteroskedastcty) and ncorporatng clusterng grouped by dvson are reported n brackets. The symbols ***, **, * ndcate that coeffcents are statstcally sgnfcant, respectvely, at 1, 5, and 10 percent levels. However, coeffcents dervng from OLS estmates are subject to the reflecton problem and cannot be nterpreted as casual. On the other hand, they show the degree of correlaton n peer absence behavour. Table 5 dsplays 2SLS estmates usng as nstrument the proporton of females n the dvson n whch ndvdual s employed. In estmates presented n ths Table we have excluded among our controls the dummy varables Handcap, Unon and Blood_donors, but results are not nfluenced by ths choce. The effects of personal and job characterstcs are for the most part very smlar to the OLS estmates. The 2SLS estmates of peer effects are hgher compared to OLS estmates, suggestng that smultanety problems produce a downward bas on the estmates of peer nfluence (smlar results are obtaned by Gavra and Raphael, 2001). For example, when we measure absence behavour usng the absence rate R, from 2SLS estmates we fnd that an ncrease of one standard devaton n peer group absence rate produces an ncrease n ndvdual absence rate of 0.29 standard devatons, whle the OLS estmates ponted to a smaller effect, of about In columns (3) and (4) are reported estmates on a smaller sample ncludng only workers employed at the larger unt. As already explaned workers are not able to select among dfferent unts, however, f any selecton s possble we thnk that t could be at unt level, snce workers may try to get a job n a unt that s located near to ther place of resdence. To avod problems that may derve from ths type of selecton, we focus only on the man unt employng the majorty of our sample workers. In columns (3) and (4) are shown estmates for ths sub-sample, usng as dependent varable respectvely R 15

17 and ln[ /(1 R )] R. The man results reman substantally unchanged, the peer effect s only slghtly hgher n the frst specfcaton and slghtly smaller n the second compared to estmates referrng to the full sample. Fnally, snce n dvsons n whch workers are often sck the nfluence of peer absenteesm on ndvdual absence behavour may also be due to a contagon effect, n column (5) are reported estmates of the effect produced by the peer absences due famly-study reasons on the sckness absence rate of ndvdual. Our measure of peer absence behavour s now represented by the proporton of peers takng famly-study leaves. As shown n column 5, where the dependent varable s ln[ /(1 R )] R, t emerges that ndvduals whose peers are more lkely to be off of work due to famly-study leaves tend to be more often absent due to sckness reasons. The same holds true when we measure absences through (estmates are not reported to avod clatterng the Table). F-statstcs, reported at the bottom of Table 5, for the test of whether the nstrument coeffcent s equal to zero are always well above the threshold value of 10 suggested by Stock and Watson (2003). R Table 5. 2SLS regressons relatng ndvdual absenteesm to peer group behavour Panel A: Two Stage Least Squares (1) (2) (3) (4) (5) R = A T ln[ R /(1 R )] R = A T ln[ R /(1 R )] ln[ R /(1 R ) Peer absence rate 0.286** (0.136) 0.320*** (0.098) 0.296** (0.133) 0.310*** (0.095) ** (0.142) Female 0.278** (0.130) 0.452*** (0.107) 0.288* (0.167) 0.523*** (0.131) 0.092*** (0.105) Unversty Degree * (0.123) (0.106) ** (0.161) ** (0.134) (0.110) Number of sons (0.020) (0.036) (0.026) (0.039) (0.039) Age (0.310) (0.452) (0.458) (0.505) (0.469) Age^ (0.372) (0.490) (0.508) (0.534) (0.497) Dummy for employees travellng to work (0.133) (0.117) (0.133) (0.142) (0.110) Dummy_dfferent_ provnce (0.031) (0.410) (0.031) (0.644) (0.387) Tenure (0.096) (0.085) (0.096) (0.124) (0.083) Yearly Gross Wage (0.065) ** (0.052) (0.059) ** (0.041) ** (0.047) Probaton ** (0.206) ** (0.301) * (0.221) ** (0.026) * (0.381) Unt sze (0.193) (0.087) 0.205** (0.090) 16

18 Panel B: Frst Stage Regressons Peer absence Peer absence Peer absence Peer absence Peer absence rate rate rate rate rate Proporton of females n the peer group 0.063*** 3.074*** 1.982*** 3.182*** 3.133*** Female Unversty Degree Number of sons Age Age^ Dummy for employees travellng to work Dummy_dfferent_ provnce Tenure Yearly Gross Wage Probaton ** *** *** *** *** Unt sze 0.639*** 0.660*** 0.355** Observatons R-Squared F-statstcs Notes: Panel A reports the Two-Stage Least Squares estmates, nstrumentng. Panel B reports the correspondng frst stage. Standard errors, corrected for heteroskedastcty, are reported n brackets. The symbols ***, **, * ndcate that coeffcents are statstcally sgnfcant, respectvely, at 1, 5, and 10 percent levels. Concludng Remarks In ths paper we have analysed the absence behavour of publc sector employees usng a unque dataset on a sample of 329 workers, whch are employed at the Italan Natonal Socal Securty Insttute, INSSI, (Isttuto Nazonale della Prevdenza Socale). The avalablty of accurate admnstratve data allows us to avod problems related to msreportng and to provde a very relable pcture of the determnants of absenteesm n the publc sector, whch s partcularly relevant gven the lttle statstcal work avalable on the subject. From our analyss t emerges that absenteesm s a functon of personal and job characterstcs such as gender, yearly gross wages, contractual arrangements and unt-sze. Females and ndvduals obtanng lower wages show hgher absence rates, whle subjects under probaton and workng n smaller unts tend to be less absent. Whle some of these varables may be related to ndvdual health condtons and then suggest that absences occur for vald reasons, others, such as unt-sze and contractual arrangement, may hde employee shrkng behavour. To better nvestgate the relatonshp between sckness absences and shrkng we have looked at the exstence of peer effects on ndvdual absences. A postve relatonshp between ndvdual absenteesm and peer group absenteesm suggests that absence s more lkely to be due to shrkng rather than to sckness. 17

19 We have consdered dvson as the relevant sphere of socal nteractons, snce ndvduals who work n the same place and have daly nteractons are more lkely to nfluence each other. Thanks to the fact that employees were assgned to dfferent dvsons and unts exclusvely n relaton to the nsttute needs and ndvduals were not n the condton to choose, we have not to deal wth self selecton problems. On the other hand, we deal wth reflecton problems usng as nstrument of peer absence behavour the proporton of females n the dvson. Ths varable should not drectly affect the ndvdual s absence decsons, but may nfluence t through group nteracton effects. Our analyss suggest that peer group effects play a crucal role n determnng ndvdual absence rate. From OLS estmates t emerges that an ncrease of one standard devaton n peer group absence rate produces an ncrease n ndvdual absence rate rangng from 0.16 to 0.19 standard devatons, accordng to the specfcaton adopted. 2SLS estmatespont to hgher effects, suggestng that smultanety problems produce a downward bas on the estmates of peer nfluence. These results are n lne wth those emergng from the prevous lterature on the subject, showng that ndvdual absence behavour s related to the absenteesm of co-workers (Ichno, Magg, 2000; Bradley et al., 2007). In addton, we show that the nfluence of peer absenteesm on ndvdual absence behavour s not due to contagon effects. In fact, we fnd relevant peer effects on sckness absences also when we measure peer absenteesm behavour consderng absences due to famly-study reasons. References Ara M. and Thourse P. (2005), Incentves and selecton n cyclcal absenteesm, Labour Economcs, 12, pp Audtor General (1997), Get Better Soon: The Management of Sckness n the W. A. Publc Sector: Offce of the Audtor General, Perth. Banerjee A. and Duflo E. (2006), Addressng Absence, Journal of Economc Perspectves, 20(1)-132 Bradley S., Green C. and Leeves G. (2007), Worker absence and shrkng: Evdence from matched teacher-school data, Labour Economcs, 14(3), pp Bramby, T. and Ercolan, M. and Treble J. (2002), Sckness absence: an nternatonal comparson, Economc Journal, 112, F315-F331. Bramby, T. and Stephan, G. (2000), Worker absenteesm: why frm sze may matter, Manchester School, 68, pp Bramby, T., Orme, C. and Treble, J. (1995), Worker absence hstores: a panel data study, Labour Economcs, 2, pp Bramby, T., Sessons, J. and Treble, J. (1994), Absenteesm, effcency wages and shrkng, Scandnavan Journal of Economcs, 94, pp Brdges, S. and Mumford, K. (2001), Absenteesm n the UK: a comparson across genders, Manchester School, 69, pp Brown S. and Sessons J. (1996), The Economcs of Absence: Theory and Evdence, Journal of Economc Surveys, 10(1), pp Case, A. and Katz, L. (1991), The Company You Keep: The Effects of Famly and Neghborhood on Dsadvantaged Youths, NBER Workng Paper, n. w3705. Chatterj, M. and Tlley, C. (2002), Sckness, absenteesm, presenteesm and sck pat, Oxford Economc Papers, 54, pp Drver R. and Watson, C. (1989), Construct valdty of voluntary and nvoluntary absence, Journal of Busness and Psychology, 4, pp

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