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

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  • Myck, Michal

    ()
    (Centre for Economic Analysis, CenEA)

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2983.

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Length: 30 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2983

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Keywords: wage dynamics; selection; ageing;

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  1. Haan, Peter & Steiner, Viktor, 2006. "Making Work Pay for the Elderly Unemployed: Evaluating Alternative Policy Reforms for Germany," IZA Discussion Papers 2424, Institute for the Study of Labor (IZA).
  2. Bernhard Boockmann & Viktor Steiner, 2006. "Cohort effects and the returns to education in West Germany," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1135-1152.
  3. Greene, William H, 1981. "Sample Selection Bias as a Specification Error: Comment," Econometrica, Econometric Society, vol. 49(3), pages 795-98, May.
  4. Richard Blundell & Howard Reed & Thomas M. Stoker, 2003. "Interpreting Aggregate Wage Growth: The Role of Labor Market Participation," American Economic Review, American Economic Association, vol. 93(4), pages 1114-1131, September.
  5. Richard Blundell & Alan Duncan, 1998. "Kernel Regression in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 62-87.
  6. James Banks, 2006. "Economic capabilities, choices and outcomes at older ages," Fiscal Studies, Institute for Fiscal Studies, vol. 27(3), pages 281-311, August.
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Cited by:
  1. Mikk Medijainen, 2010. "Generational Accounting As A Tool To Evaluate The Fiscal Sustainability Of Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 74, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  2. Carsten Schröder, 2012. "The sensitivity of distributional measures to the reference period of income," Kiel Working Papers 1777, Kiel Institute for the World Economy.
  3. V. Vandenberghe, 2011. "Boosting the Employment Rate of Older Men and Women," De Economist, Springer, vol. 159(2), pages 159-191, June.
  4. Christian Dudel, 2009. "The Demographic Dilemma: Fertility, Female Labor Force Participation and Future Growth in Germany 2007-2060," SOEPpapers on Multidisciplinary Panel Data Research 158, DIW Berlin, The German Socio-Economic Panel (SOEP).

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