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Research ArticleArticle

Keeping the Production Line Running: Internal Substitution and Employee Absence

Lena Hensvik and Olof Rosenqvist
Published online before print January 30, 2018, 0516_7914R1; DOI: https://doi.org/10.3368/jhr.54.1.0516.7914R1
Lena Hensvik
Lena Hensvik is an associate professor of economics at the Institute for Evaluation of Labour Market an Education Policy (IFAU) in Uppsala, Sweden
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Olof Rosenqvist
Olof Rosenqvist is a post-doc researcher at the Institute for Evaluation of Labour Market and Education Policy (IFAU) in Uppsala, Sweden
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Abstract

We postulate that the production losses from absence depend on firms’ ability to internally substitute for absent workers, incentivizing firms to keep absence low in jobs with few substitutes. Using Swedish employer-employee data we show that absence is substantially lower in such positions conditional on establishment and occupation fixed effects. The result is driven by employee adjustments of absence to substitutability, and sorting of low (high) absence workers into (out of) positions with few substitutes. These findings highlight that internal substitution insures firms against production disruptions and that absence costs are important aspects of firms’ hiring and separation decisions.

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Journal of Human Resources: 60 (3)
Journal of Human Resources
Vol. 60, Issue 3
1 May 2025
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Keeping the Production Line Running: Internal Substitution and Employee Absence
Lena Hensvik, Olof Rosenqvist
Journal of Human Resources Jan 2018, 0516_7914R1; DOI: 10.3368/jhr.54.1.0516.7914R1

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Keeping the Production Line Running: Internal Substitution and Employee Absence
Lena Hensvik, Olof Rosenqvist
Journal of Human Resources Jan 2018, 0516_7914R1; DOI: 10.3368/jhr.54.1.0516.7914R1
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