Poisson Models with Employer-Employee Unobserved Heterogeneity: An Application to Absence Data∗

We propose a parametric model based on the Poisson distribution that permits to take into account both unobserved worker and workplace het-erogeneity as long as both effects are nested. By assuming that workplace and worker unobserved heterogeneity components follow a gamma and a Dirichlet distribution respectively, we obtain a closed form for the uncon-ditional density function. We estimate the model to obtain the determi-nants of absenteeism using linked employer-employee Canadian data from the Workplace and Employee Survey (2003). Coefficient estimates are in-terpreted in the framework of the typical labor-leisure model. We show that omitting unobserved heterogeneity on either side of the employe-ment relationship leads to notable biases in the estimated coefficients. In particular, the impact of wages on absences is underestimated in simpler models