Emiliano Sandri (UCL)
Domenico Depalo and Salvatore Lattanzio
This paper analyzes firm-level responses to workplace accidents using detailed administrative data and a matched dynamic difference-in-differences approach. We document how firms adjust employment, wages, and workforce composition following injuries. Firms respond by expanding employment, primarily through permanent hires. Incumbent workers experience earnings gains driven mostly by higher weeks worked in a year and small but significant weekly wage increases. The effects on incumbents are stronger when the injured worker is low-skilled or employed in low-productivity firms, reflecting greater internal substitutability. Conversely, firms turn to external hiring more when the injured worker is high-skill. Firm productivity and profitability remain largely unaffected, indicating that higher replacement costs offset increases in labor input. Our findings highlight substantial adjustment costs and limited worker substitutability following workplace injuries.