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Estimating a Firm's Age-Productivity Profile Using the Present Value of Workers' Earnings

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  • Laurence J. Kotlikoff
  • Jagadeesh Gokhale

Abstract

In hiring new workers, risk-neutral employers equate the present expected value of a worker's compensation to the present expected value of his/her productivity. Data detailing how present expected compensation varies with the age of hire, therefore, embed information about how productivity varies with age. This paper infers age-productivity profiles using data on the present expected value of earnings of new hires of a Fortune 1000 firm. For each of the five occupation/sex groups considered, productivity falls with age, with productivity exceeding earnings when young and vice versa when old.

Suggested Citation

  • Laurence J. Kotlikoff & Jagadeesh Gokhale, 1992. "Estimating a Firm's Age-Productivity Profile Using the Present Value of Workers' Earnings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1215-1242.
    • Handle: RePEc:oup:qjecon:v:107:y:1992:i:4:p:1215-1242.
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    File URL: http://hdl.handle.net/10.2307/2118386
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    Cited by:

    1. Philippe Lemistre & Jean-Michel Plassard, 2002. "Stratégies de mobilité et rendements de l'ancienneté en France," Économie et Prévision, Programme National Persée, vol. 155(4), pages 45-60.
    2. Börsch-Supan, Axel & Hunkler, Christian & Weiss, Matthias, 2021. "Big data at work: Age and labor productivity in the service sector," The Journal of the Economics of Ageing, Elsevier, vol. 19(C).
    3. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
    4. Dohmen, Thomas J., 2004. "Performance, seniority, and wages: formal salary systems and individual earnings profiles," Labour Economics, Elsevier, vol. 11(6), pages 741-763, December.
    5. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
    6. Börsch-Supan, Axel & Weiss, Matthias, 2016. "Productivity and age: Evidence from work teams at the assembly line," The Journal of the Economics of Ageing, Elsevier, vol. 7(C), pages 30-42.
    7. 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.
    8. Mask, Joshua, 2023. "Salary history bans and healing scars from past recessions," Labour Economics, Elsevier, vol. 84(C).
    9. Heutel, Garth, 2009. "Testing implications of a tournament model of school district salary schedules," Economics of Education Review, Elsevier, vol. 28(1), pages 143-151, February.
    10. Hudson, John & Sessions, John G., 2011. "Parental education, labor market experience and earnings: New wine in an old bottle?," Economics Letters, Elsevier, vol. 113(2), pages 112-115.
    11. Schneider, Lutz, 2006. "Sind ältere Beschäftigte weniger produktiv? Eine empirische Analyse anhand des LIAB," IWH Discussion Papers 13/2006, Halle Institute for Economic Research (IWH).
    12. Saint-Paul, Gilles, 2009. "Does the welfare state make older workers unemployable?," CEPR Discussion Papers 7490, C.E.P.R. Discussion Papers.
    13. Adams, Scott, 2007. "Health insurance market reform and employee compensation: The case of pure community rating in New York," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1119-1133, June.
    14. University of Pennsylvania & Ludo Visschers, 2007. "Employment Uncertain and Wage Contracts," 2007 Meeting Papers 547, Society for Economic Dynamics.
    15. van Dalen, Hendrik P., 1996. "Pitfalls in the economic analysis of aging," Journal of Policy Modeling, Elsevier, vol. 18(2), pages 157-184, April.
    16. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    17. Neumark, David & Song, Joanne, 2013. "Do stronger age discrimination laws make Social Security reforms more effective?," Journal of Public Economics, Elsevier, vol. 108(C), pages 1-16.
    18. Chino, Atsushi, 2025. "Negative effects of delayed retirement: Employment protection of older workers and firm value," Journal of Corporate Finance, Elsevier, vol. 95(C).
    19. Shy, Oz & Stenbacka, Rune, 2018. "Dynamic labor market competition and wage seniority," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 130-154.
    20. Börsch-Supan, Axel, 2013. "Myths, scientific evidence and economic policy in an aging world," The Journal of the Economics of Ageing, Elsevier, vol. 1, pages 3-15.
    21. Shioji, Etsuro, 2001. "Composition Effect of Migration and Regional Growth in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 15(1), pages 29-49, March.

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