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Wages and Ageing: Is there Evidence for the "Inverse-U Profile"?

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Author Info
Michal Myck
Abstract

How individual wages change with time, and how they are expected to change as individuals grow older, is one of crucial determinants of their behaviour on the labour market including their decision to retire. The profile of individual hourly wages has for a long time been assumed to follow an "inverse-U" path, although there has been little work specifically concerning the age-wage profile and documenting it convincingly. The focus of this paper is the relationship between age and wages with special attention given to individuals close to retirement. The analysis is presented in a comparative context for Britain and Germany looking at two longitudinal datasets (BHPS and GSOEP respectively) for years 1995-2004. It stresses the importance of cohort effects and selection out of employment which seem crucial in determining the downward-sloping part of the "inverse-U" profile observed in most cross-sections. There seems to be little evidence that wages fall with age.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.63414.de/dp724.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 724.

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Length: 28 p.
Date of creation: 2007
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Handle: RePEc:diw:diwwpp:dp724

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Related research
Keywords: Wage dynamics; ageing; selection;

Find related papers by JEL classification:
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods

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