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Regional population structure and young workers’ wages

Author

Listed:
  • Alfred Garloff

    (institute for Employment Research (IAB))

  • Duncan Roth

    (institute for Employment Research (IAB))

Abstract

This paper estimates the effect that changes in the size of the youth population have on the wages of young workers. Assuming that differently aged workers are only imperfectly substitutable, economic theory predicts that individuals in larger age groups earn lower wages. We test this hypothesis for a sample of young, male, full-time employees in Western Germany during the period 1999-2010. In contrast to other studies, functional rather than administrative spatial entities are used as they provide a more accurate measure of the youth population in an actual labour market. Based on instrumental variables estimation, we show that an increase in the youth share by one percentage point is predicted to decrease a young worker’s wages by 3%. Our results also suggest that a substantial part of this effect is due to members of larger age groups being more likely to be employed in lower-paying occupations.

Suggested Citation

  • Alfred Garloff & Duncan Roth, 2017. "Regional population structure and young workers’ wages," MAGKS Papers on Economics 201706, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201706
    as

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    File URL: https://www.uni-marburg.de/fb02/makro/forschung/magkspapers/paper_2017/06-2017_garloff.pdf
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    References listed on IDEAS

    as
    1. Jerry Hausman, 2001. "Mismeasured Variables in Econometric Analysis: Problems from the Right and Problems from the Left," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 57-67, Fall.
    2. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    3. Eckey, Hans-Friedrich & Kosfeld, Reinhold & Türck, Matthias, 2006. "Abgrenzung deutscher Arbeitsmarktregionen," Volkswirtschaftliche Diskussionsbeiträge 81, University of Kassel, Faculty of Economics and Management.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Population structure; wages; youth share; labour-market regions; instrumental variables; occupational selection;
    All these keywords.

    JEL classification:

    • 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
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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