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Are older workers overpaid? A literature review

  • Daniel van Vuuren

    ()

  • Paul de Hek

    ()

It is widely believed that wage and productivity profiles of individual workers do not coincide at all ages. We give an overview of the theories which provide a rationale for this, and discuss the empirical literature. Human capital theories typically imply that wages rise with tenure, so that job reallocation at old age would imply a wage cut. Incentive theories typically imply that wages exceed productivity at the end of a worker's career. Bargaining power of unions may also lead to 'overpayment' of older workers. Some general conclusions regarding the wages of older workers are formulated on the basis of the authors' reading of the empirical literature.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 165.

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Date of creation: Dec 2010
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Handle: RePEc:cpb:discus:165
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