The Response of Firms to Maternity Leave and Sickness Absence

Abstract

We study how employers respond to worker absences arising from maternity and non-work-related sickness leave. Using administrative data on nearly one million spells of leave in Brazil, we identify the short-run effects of a leave spell starting on occupational employment, hiring, and separations. Employers respond immediately by increasing hiring, but the increase is substantially less than one-for-one replacement. We find modest heterogeneity across worker and job characteristics and market conditions, but the largest differences in employer responses arise across maternity and sickness leave. Overall, our results imply that hiring replacement labor is costly and firms manage absences through other channels.