Disability retirement and public sector reorganization: Hospital mergers in Norway

Abstract

This paper analyses the effect of hospital mergers on the probability of employee disability retirement, focussing on whether the effect on disability retirement differs with employee educational attainment. It uses register data for all employees of Norwegian public hospitals from 2000 to 2006. The analyses employ a difference-in-differences approach using hospital fixed effects. The results show that the probability of entering disability retirement only increases in the second year after the merger compared with non-merger years, indicating that the effect is short-term. Predicted probabilities indicate that the effect is only significant for employees with lower education. Possible explanations are that increased strain in association with the merger leads to disability among employees or that managers use disability retirement as a way of achieving staff reductions without formally laying off staff.