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Does it pay to be productive? The case of age groups

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  • Alessandra Cataldi
  • Stephan Kampelmann
  • François Rycx

Abstract

Purpose – The purpose of this paper is to evaluate empirically the relationship between workforce age, wage and productivity at the firm level. Design/methodology/approach – Panel data techniques are applied to Belgian data on private sector workers and firms during 1999-2006. Findings – Results (robust to various potential econometric issues, including unobserved firm heterogeneity, endogeneity and state dependence) suggest that older workers are significantly less productive than prime age and young workers. In contrast, the productivity of middle-aged workers is not found to be significantly different compared to young workers. Findings further indicate that average hourly wages within firms increase significantly with workers’ age. Overall, this leads to the conclusion that young (older) workers appear to be “underpaid” (“overpaid”). Originality/value – These findings contribute to the growing literature on how the workforce age structure affects productivity and wages.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal International Journal of Manpower.

Volume (Year): 33 (2012)
Issue (Month): 3 (March)
Pages: 264-283

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Handle: RePEc:eme:ijmpps:v:33:y:2012:i:3:p:264-283

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Related research

Keywords: Belgium; Linked panel data; Pay structures; Private sector organizations; Productivity; Wages; Workforce age;

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References

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  1. Edward P. Lazear & Paul Oyer, 2007. "Personnel Economics," NBER Working Papers 13480, National Bureau of Economic Research, Inc.
  2. Thierry Lallemand & François Rycx, 2009. "Are Older Workers Harmful for Firm Productivity?," De Economist, Springer, vol. 157(3), pages 273-292, September.
  3. Benoit Dostie, 2006. "Wages, Productivity and Aging," Cahiers de recherche 06-15, HEC Montréal, Institut d'économie appliquée.
  4. Christian Grund & Niels Westergaard-Nielsen, 2008. "Age structure of the workforce and firm performance," International Journal of Manpower, Emerald Group Publishing, vol. 29(5), pages 410-422, September.
  5. Axel Börsch-Supan & Alexander Ludwig, 2010. "Old Europe Ages: Reforms and Reform Backlashes," NBER Chapters, in: Demography and the Economy, pages 169-204 National Bureau of Economic Research, Inc.
  6. Vegard Skirbekk, 2003. "Age and individual productivity: a literature survey," MPIDR Working Papers WP-2003-028, Max Planck Institute for Demographic Research, Rostock, Germany.
  7. Ilmakunnas, Pekka & Maliranta, Mika, 2003. "Technology, Labor Characteristic and Wage-productivity Gaps," Discussion Papers 860, The Research Institute of the Finnish Economy.
  8. Torbjørn Hægeland & Tor Jakob Klette, 1997. "Do Higher Wages Reflect Higher Productivity? Education, Gender and Experience Premiums in a Matched Plant-Worker Data Set," Discussion Papers 208, Research Department of Statistics Norway.
  9. Bertschek, Irene & Meyer, Jenny, 2008. "Do Older Workers Lower IT-Enabled Productivity? Firm-Level Evidence from Germany," ZEW Discussion Papers 08-129, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Cardoso, Ana Rute & Guimaraes, Paulo & Varejão, José, 2010. "Are Older Workers Worthy of Their Pay? An Empirical Investigation of Age-Productivity and Age-Wage Nexuses," IZA Discussion Papers 5121, Institute for the Study of Labor (IZA).
  11. Göbel, Christian & Zwick, Thomas, 2009. "Age and productivity: evidence from linked employer employee data," ZEW Discussion Papers 09-020, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Judith Hellerstein & David Neumark, 2004. "Production Function and Wage Equation Estimation with Heterogenous Labor: Evidence from a New Matched Employer-Employee Dataset," Working Papers 04-05, Center for Economic Studies, U.S. Census Bureau.
  13. Julia I. Lane & John C. Haltiwanger & James Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, vol. 89(2), pages 94-98, May.
  14. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  15. Malmberg, Bo & Lindh, Thomas & Halvarsson, Max, 2005. "Productivity consequences of workforce ageing - Stagnation or a Horndal effect?," Arbetsrapport 2005:17, Institute for Futures Studies.
  16. Johnson, William R, 1978. "A Theory of Job Shopping," The Quarterly Journal of Economics, MIT Press, vol. 92(2), pages 261-78, May.
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Citations

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Cited by:
  1. Andrea Garnero & Stephan Kampelmann & François Rycx, 2013. "Part-time Work, Wages and Productivity: Evidence from Belgian Matched Panel Data," Working Papers CEB 13-042, ULB -- Universite Libre de Bruxelles.
  2. Julia Lang, 2012. "The Aims of Lifelong Learning: Age-Related Effects of Training on Wages and Job Security," SOEPpapers on Multidisciplinary Panel Data Research 478, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Andrea Garnero & François Rycx, 2013. "The heterogeneous effects of workforce diversity on productivity, wages and profits," Working Papers CEB 13-015, ULB -- Universite Libre de Bruxelles.
  4. Lang, Julia, 2012. "The aims of lifelong learning: Age-related effects of training on wages and job security," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62073, Verein für Socialpolitik / German Economic Association.

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