Smoking showed a large positive effect on the annual number of sick leaves. Hence, the results suggest that the gains to preventing and/or reducing smoking, in terms of reduced production losses, may be large. However, since the large effect of smoking persists when controlling for a range of health factors and occupational factors, the results also suggest that much of the higher number of absences among smokers may be explained by factors other than reduced health. The estimates should be viewed as upper bounds of the effect of smoking on sick leave, since smoking is potentially an endogenous variable.