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Ageing and Employability. Evidence from Belgian Firm-Level Data

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  • Mariann RIGO

    ()
    (Department of Economics, Central European University, Budapest and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Vincent VANDENBERGHE

    ()
    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Fabio WALTENBERG

    ()
    (Departamento de Economia and Centro de Estudos sobre Desigualdade e Desenvolvimento (CEDE), Universidade Federal Fluminense (UFF), Brazil)

Abstract

The Belgian population is ageing due to demographic changes; so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are older workers employable? The answer depends to a large extent on the gap between older workers’ productivity and their cost to employers. To address this question we use a production function that is modified to reflect the heterogeneity of labour with workers of different age potentially diverging in terms of marginal products. Using unique firm-level panel data we produce robust evidence on the causal effect of ageing on productivity (value added) and labour costs. We take advantage of the panel structure of data and resort to first-differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firms’ age-mix choices in the short run) using i) the structural approach suggested by Ackerberg, Caves & Frazer (2006), ii) alongside more traditional system-GMM methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Our results indicate a negative impact of larger shares of older workers on productivity that is not compensated by lower labour costs, resulting in a lower productivity-labour costs gap. An increment of 10%-points of their share causes a 1.3-2.8% contraction of this gap. We conduct several robustness checks that largely confirm this result. This is not good news for older individuals’ employability and calls for interventions in the Belgian private economy aimed at combating the decline of productivity with age and/or better adapting labour costs to age-productivity profiles.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2012011.

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Length: 49
Date of creation: 04 Jun 2012
Date of revision:
Handle: RePEc:ctl:louvir:2012011

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Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)
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Web page: http://www.uclouvain.be/ires
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Keywords: Ageing; Old Labour Productivity and Employability; Panel Data Analysis;

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References

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Cited by:
  1. Lara LEBEDINSKI & Vincent VANDENBERGHE, 2013. "Assessing education's contribution to productivity using firm-level evidence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Anna Lovasz & Mariann Rigo, 2012. "Vintage Effects, Ageing and Productivity," Budapest Working Papers on the Labour Market 1203, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Mahlberg, Bernhard & Freund, Inga & Crespo Cuaresma, Jesús & Prskawetz, Alexia, 2013. "The age-productivity pattern: Do location and sector affiliation matter?," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 01/2013, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).

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