IDEAS home Printed from https://ideas.repec.org/p/tep/teppwp/wp12-14.html
   My bibliography  Save this paper

Effect of Age on the Wage Distribution: A Quantitative Evaluation Using US Data

Author

Listed:
  • Sarah Le Duigou

Abstract

The distribution of wages varies with workers'age. In this article we build a model able to explain this evolution by taking into account two channels: the evolution of the wage game described in Burdett and Mortensen (1998), and the evolution of the workers'productivity within a match. The model considers three age groups, the juniors, the adults and the seniors. Using US data, we show that these two channels allow to reproduce quite well the aggregated wage distribution as well as the evolution of it over the workers life-cycle. The channel of the evolution of the wage game accounts for the lower density of low wages in the seniors'wage distribution. Yet firms are naturally induced to create lower quality jobs to seniors because of their short working horizon. In order to fit the data, we show that it is necessary to assume learning by doing of workers. The first aspect of learning by doing is to increase the workers'specific productivity, the second is to improve the adaptation to a new jobs of older workers. These two aspects explain different features of the wage distribution. The first one explains why the mode of the wage distribution is translated over the workers'life-cycle. The second accounts for the existence of high wages within the distribution of older workers.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sarah Le Duigou, 2012. "Effect of Age on the Wage Distribution: A Quantitative Evaluation Using US Data," TEPP Working Paper 2012-14, TEPP.
    • Handle: RePEc:tep:teppwp:wp12-14
    as

    Download full text from publisher

    File URL: http://www.tepp-repec.eu/RePEc/files/teppwp/TEPP-WP-12-14-Le-Duigou.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 989-1016, November.
    2. Guido Menzio & Irina Telyukova & Ludo Visschers, 2016. "Directed Search over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 38-62, January.
    3. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
    4. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    5. Jesper Bager & Francois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation," 2006 Meeting Papers 679, Society for Economic Dynamics.
    6. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2008. "A quantitative evaluation of payroll tax subsidies for low-wage workers: An equilibrium search approach," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 817-843, April.
    7. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2007. "The Pre-Retirement Job Search: A Basic Explanation of the Older Worker Employment," Documents de recherche 07-01, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    8. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-969, July.
    9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlos Carrillo-Tudela, 2010. "Job Search, Human Capital and Wage Inequality," 2010 Meeting Papers 723, Society for Economic Dynamics.
    2. van den Berg, Gerard J. & van Vuuren, Aico, 2010. "The effect of search frictions on wages," Labour Economics, Elsevier, vol. 17(6), pages 875-885, December.
    3. Chéron, Arnaud & Terriau, Anthony, 2018. "Life cycle training and equilibrium unemployment," Labour Economics, Elsevier, vol. 50(C), pages 32-44.
    4. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2013. "Life-Cycle Equilibrium Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 843-882.
    5. John Kennes & Daniel le Maire, 2010. "Coordination Frictions and Job Heterogeneity: A Discrete Time Analysis," Economics Working Papers 2010-05, Department of Economics and Business Economics, Aarhus University.
    6. Kyle F Herkenhoff, 2019. "The Impact of Consumer Credit Access on Unemployment," Review of Economic Studies, Oxford University Press, vol. 86(6), pages 2605-2642.
    7. Gorry, Aspen, 2013. "Minimum wages and youth unemployment," European Economic Review, Elsevier, vol. 64(C), pages 57-75.
    8. Sarah Le Duigou, 2012. "L'effet de l'âge sur la distribution des salaires," Revue française d'économie, Presses de Sciences-Po, vol. 0(1), pages 163-185.
    9. James Albrecht & Pieter A. Gautier & Susan Vroman, 2006. "Equilibrium Directed Search with Multiple Applications," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 869-891.
    10. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    11. Fitzenberger, Bernd & Garloff, Alfred, 2005. "Descriptive Evidence on Labor Market Transitions and the Wage Structure in Germany," ZEW Discussion Papers 05-95, ZEW - Leibniz Centre for European Economic Research.
    12. Julien Albertini & Arthur Poirier & Anthony Terriau, 2020. "The impact of EITC on education, labor market trajectories, and inequalities," Working Papers 2036, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    13. Rao, Neel, 2022. "Search equilibrium with unobservable investment," Games and Economic Behavior, Elsevier, vol. 133(C), pages 300-330.
    14. Ronald Wolthoff, 2014. "It'S About Time: Implications Of The Period Length In An Equilibrium Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 839-867, August.
    15. Sarah Le Duigou, 2020. "Endogenous Unemployment Benefits in an Equilibrium Job Search Model over the Life-Cycle," Post-Print hal-03884234, HAL.
    16. Arnaud Cheron & Anthony Terriau, 2015. "Search frictions and (in)efficient vocational training over the life-cycle," Working Papers hal-01292113, HAL.
    17. Garloff, Alfred, 2003. "Lohndispersion und Arbeitslosigkeit: Neuere Ansätze in der Suchtheorie," ZEW Discussion Papers 03-60, ZEW - Leibniz Centre for European Economic Research.
    18. Atabek Atayev, 2021. "Nonlinear Prices, Homogeneous Goods, Search," Papers 2109.15198, arXiv.org.
    19. Nobuhiro Kiyotaki & Ricardo Lagos, 2007. "A Model of Job and Worker Flows," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 770-819, October.
    20. Albertini, Julien & Terriau, Anthony, 2019. "Informality over the life-cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 105(C), pages 182-202.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tep:teppwp:wp12-14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sylvain (email available below). General contact details of provider: https://edirc.repec.org/data/teppnfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.