Practical correlation bias correction in two-way fixed effects linear regression

When doing two-way fixed effects OLS estimations, both the variances and covariance of the fixed effects are biased. A formula for a bias correction is known, but in large datasets it involves inverses of impractically large matrices. We detail how to compute the bias correction in this case

OLS with multiple high dimensional category dummies

We present some theoretical results which simplifies the estimation of linear models with multiple high-dimensional fixed effects. In particular, we show how to sweep out multiple fixed effects from the normal equations, in analogy with the common within-groups estimator

The Rise in Absenteeism: Disentangling the Impacts of Cohort, Age and Time

We examine the remarkable rise in absenteeism among Norwegian employees since the early 1990's, with particular emphasis on disentangling the roles of cohort, age, and time. Based on a fixed effects model, we show that individual age-adjusted absence propensities have risen even more than aggregate absence rates from 1993 to 2005, debunking the popular hypothesis that the rise in absenteeism resulted from the inclusion of new cohorts – with weaker work-norms – into the workforce. We also reject the idea that the rise in absenteeism resulted from more successful integration of workers with poor health; on the contrary, a massive rise in disability rolls during the 1990’s suggest that poor-health workers have left the labor market in unprecedented numbers.sickness absence, endogenous selection, multicollinearity, fixed effects logit

The Anatomy of Absenteeism

Based on comprehensive administrative register data from Norway, we examine the determinants of sickness absence behavior; in terms of employee characteristics workplace characteristics, panel doctor characteristics, and economic conditions. The analysis is based on a novel concept of a worker's steady state sickness absence propensity, computed from a multivariate hazard rate model designed to predict the incidence and the duration of sickness absence for all workers. Key conclusions are i) that most of the cross-sectional variation in absenteeism is caused by genuine employee heterogeneity; ii) that the identity of a person's panel doctor has a significant impact on absence propensity; iii) that sickness absence insurance is frequently certified for reasons other than sickness; and iv) that the recovery rate rises enormously just prior to the exhaustion of sickness insurance benefits.sickness absence, multivariate hazards, MMPH, NPMLE

The Impacts of Labor Market Policies on Job Search Behavior and Post-Unemployment Job Quality

We examine empirically the impacts of labor market policies – in terms of unemployment insurance (UI) and active labor market programs (ALMP) – on the duration and outcome of job search and on the quality of a subsequent job. We find that time invested in job search tends to pay off in the form of higher earnings once a job match is formed. More generous UI raises expected unemployment duration, while improving the quality of the resultant job. Participation in ALMP raises the probability of finding a job and the level of expected earnings, but at the cost of lengthening job search.multivariate hazards, job search, job quality, timing-of-events, NPMLE, MMPH

How tight is the labour market? A micro-based macro indicator

We develop a new indicator of labour market tightness, based on the pure calendar time changes in individuals’ transition rates from unemployment to employment.Based on Norwegian register data from the 1989-2002 period, we show that this indicator,in contrast to the aggregate rate of unemployment, correlates well with an expost-calculated GDP-based business cycle indicator, even around the time of business cycle turning points. The indicator can be calculated just as quickly as the unemployment rate, both at an aggregate and a disaggregate level, and hence improve policy makers ability to assess current labour market developments

The impacts of labor market policies on job search behavior and post-unemployment job quality

We examine empirically the impacts of labor market policies - in terms of unemployment insurance (UI) and active labor market programs (ALMP) - on the duration and outcome of job search and on the quality of a subsequent job. We find that time invested in job search tends to pay off in the form of higher earnings once a job match is formed. More generous UI raises expected unemployment duration, while improving the quality of the resultant job. Participation in ALMP raises the probability of finding a job and the level of expected earnings, but at the cost of lengthening job search

The rise in absenteeism: Disentangling the impacts of cohort, age and time

We examine the remarkable rise in absenteeism among Norwegian employees since the early 1990's, with particular emphasis on disentangling the roles of cohort, age, and time. Based on a fixed effects model, we show that individual age-adjusted absence propensities have risen even more than aggregate absence rates from 1993 to 2005, debunking the popular hypothesis that the rise in absenteeism resulted from the inclusion of new cohorts - with weaker work-norms - into the workforce. We also reject the idea that the rise in absenteeism resulted from more successful integration of workers with poor health;on the contrary, a massive rise in disability rolls during the 1990's suggest that poor-health workers have left the labor market in unprecedented numbers

The impact of labor market policies on job search behavior and post-unemployment job quality

We examine empirically the impacts of labor market policies - in terms of unemployment insurance (UI) and active labor market programs (ALMP) - on the duration and outcome of job search and on the quality of a subsequent job. We find that time invested in job search tends to pay off in the form of higher earnings once a job match is formed. More generous UI raises expected unemployment duration, while improving the quality of the resultant job. Participation in ALMP raises the probability of finding a job and the level of expected earnings, but at the cost of lengthening job search

The anatomy of absenteeism

Based on comprehensive administrative register data from Norway, we examine the determinants of sickness absence behavior; in terms of employee characteristics workplace characteristics, panel doctor characteristics, and economic conditions. The analysis is based on a novel concept of a worker's steady state sickness absence propensity, computed from a multivariate hazard rate model designed to predict the incidence and the duration of sickness absence for all workers. Key conclusions are i) that most of the cross-sectional variation in absenteeism is caused by genuine employee heterogeneity; ii) that the identity of a person's panel doctor has a significant impact on absence propensity; iii) that sickness absence insurance is frequently certified for reasons other than sickness; and iv) that the recovery rate rises enormously just prior to the exhaustion of sickness insurance benefits