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Are older workers overpaid? A literature review

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  • Daniel van Vuuren

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  • Paul de Hek

Abstract

It is widely believed that wage and productivity profiles of individual workers do not coincide at all ages. We give an overview of the theories which provide a rationale for this, and discuss the empirical literature. Human capital theories typically imply that wages rise with tenure, so that job reallocation at old age would imply a wage cut. Incentive theories typically imply that wages exceed productivity at the end of a worker's career. Bargaining power of unions may also lead to 'overpayment' of older workers. Some general conclusions regarding the wages of older workers are formulated on the basis of the authors' reading of the empirical literature.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 165.

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Date of creation: Dec 2010
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Handle: RePEc:cpb:discus:165

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Cited by:
  1. Bosch, Nicole & ter Weel, Bas, 2013. "Labour-Market Outcomes of Older Workers in the Netherlands: Measuring Job Prospects Using the Occupational Age Structure," IZA Discussion Papers 7252, Institute for the Study of Labor (IZA).
  2. Frank van Erp & Niels Vermeer & Daniel van Vuuren, 2013. "Non-financial determinants of retirement," CPB Discussion Paper 243, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Daniel van Vuuren, 2011. "Flexible Retirement," CPB Discussion Paper 174, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Paul Hek & Daniel Vuuren, 2011. "Are older workers overpaid? A literature review," International Tax and Public Finance, Springer, vol. 18(4), pages 436-460, August.
  5. Nicole Bosch & Bas ter Weel, 2013. "Labour-market outcomes of older workers in the Netherlands: Measuring job prospects using the occupational age structure," CPB Discussion Paper 234, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Ilmakunnas, Pekka & Miyakoshi, Tatsuyoshi, 2013. "What are the drivers of TFP in the Aging Economy? Aging labor and ICT capital," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 201-211.

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