Knowledge that Transforms

A significant amount of work time is lost each year due to worker absence, but evidence on the productivity losses from absenteeism remains scant due to difficulties with identification. We use uniquely detailed data on the timing, duration, and cause of absences among teachers to address many of the potential biases from the endogeneity of worker absence. Our analysis indicates that worker absences have large negative impacts: the expected loss in daily productivity from employing a temporary substitute is on par with replacing a regular worker of average productivity with one at the 10th–20th percentile of productivity.

In this reply I describe the unraveling of transaction dates in several markets, including the labor market for new lawyers hired by large law firms. This and other markets illustrate that unraveling can occur in markets with competitive prices, that it can result in substantial inefficiencies, and that marketplace institutions play a role in restoring efficiency. All of these contradict the conclusions of Priest.