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How does the age structure of worker flows affect firm performance?

Author

Listed:
  • Pekka Ilmakunnas

    (Aalto University School of Business)

  • Mika Maliranta

    (The Research Institute of the Finnish Economy (ETLA)
    University of Jyväskylä)

Abstract

We develop a method for decomposing firm performance to impacts coming from the inflows and outflows of workers and apply it to study whether older workers are costly to firms. Our estimation equations are derived from a variant of the decomposition methods frequently used for measuring micro-level sources of industry productivity growth. By using comprehensive linked employer–employee data, we study the productivity and wage effects, and hence the profitability effects, of the hiring and separation of younger and older workers. The evidence shows that the separations of older workers are profitable to firms, especially in the manufacturing ICT-industries. To account for the correlation of the worker flows and productivity shocks we first estimate the shocks from a production function using materials as a proxy variable. In the second step the estimated shock is used as a control variable in our productivity, wage, and profitability equations.

Suggested Citation

  • Pekka Ilmakunnas & Mika Maliranta, 2016. "How does the age structure of worker flows affect firm performance?," Journal of Productivity Analysis, Springer, vol. 46(1), pages 43-62, August.
    • Handle: RePEc:kap:jproda:v:46:y:2016:i:1:d:10.1007_s11123-016-0471-5
    DOI: 10.1007/s11123-016-0471-5
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    More about this item

    Keywords

    Aging; Productivity; Wage; Profits; Hiring; Separation; Employer–employee data;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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