Paid Sick Leave and Employee Absences

This paper studies the response of sickness absences to changes in the replacement rate for sick leave. In June 2008, a national law modified both the strength of monitoring and the monetary cost of sick leaves for public sector employees in Italy. Focusing on the National Health Service, which accounts for 21 per cent of the Italian public administration, first, I show that absences largely decreased following the reform. Second, using a difference-in-differences strategy that exploits variation in changes to the replacement rate for sick leave, I estimate that a 1 per cent point decrease in the replacement rate reduces absences by 1 per cent.