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Ageing and Employability. Evidence from Belgian Firm-Level Data

Author

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  • Mariann RIGO

    () (Department of Economics, Central European University, Budapest and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Vincent VANDENBERGHE

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Fabio WALTENBERG

    () (Departamento de Economia and Centro de Estudos sobre Desigualdade e Desenvolvimento (CEDE), Universidade Federal Fluminense (UFF), Brazil)

Abstract

The Belgian population is ageing due to demographic changes; so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are older workers employable? The answer depends to a large extent on the gap between older workers’ productivity and their cost to employers. To address this question we use a production function that is modified to reflect the heterogeneity of labour with workers of different age potentially diverging in terms of marginal products. Using unique firm-level panel data we produce robust evidence on the causal effect of ageing on productivity (value added) and labour costs. We take advantage of the panel structure of data and resort to first-differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firms’ age-mix choices in the short run) using i) the structural approach suggested by Ackerberg, Caves & Frazer (2006), ii) alongside more traditional system-GMM methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Our results indicate a negative impact of larger shares of older workers on productivity that is not compensated by lower labour costs, resulting in a lower productivity-labour costs gap. An increment of 10%-points of their share causes a 1.3-2.8% contraction of this gap. We conduct several robustness checks that largely confirm this result. This is not good news for older individuals’ employability and calls for interventions in the Belgian private economy aimed at combating the decline of productivity with age and/or better adapting labour costs to age-productivity profiles.

Suggested Citation

  • Mariann RIGO & Vincent VANDENBERGHE & Fabio WALTENBERG, 2012. "Ageing and Employability. Evidence from Belgian Firm-Level Data," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2012011
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    References listed on IDEAS

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    Cited by:

    1. Bartelsman, Eric & Dobbelaere, Sabien & Peters, Bettina, 2013. "Allocation of Human Capital and Innovation at the Frontier: Firm-Level Evidence on Germany and the Netherlands," IZA Discussion Papers 7540, Institute for the Study of Labor (IZA).
    2. V. Vandenberghe, 2017. "The productivity challenge. What to expect from better-quality labour and capital inputs?," Applied Economics, Taylor & Francis Journals, vol. 49(40), pages 4013-4025, August.
    3. Vincent Vandenberghe, 2015. "Is Workforce Diversity Good for Efficiency?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. repec:spr:izalbr:v:7:y:2018:i:1:d:10.1186_s40172-017-0061-4 is not listed on IDEAS
    5. Andrea Albanese & Bart Cockx & Yannick Thuy, 2015. "Working Time Reductions At The End Of The Career. Do They Prolong The Time Spent In Employment?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 15/916, Ghent University, Faculty of Economics and Business Administration.
    6. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2017. "Illegal immigration and the shadow economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1050-1080, December.
    7. Françoise Delmez & Vincent Vandenberghe, 2017. "Working long hours: less productive but less costly? Firm-level evidence from Belgium," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2017022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. Muriel Dejemeppe & Catherine Smith & Bruno der Linden, 2015. "Did the Intergenerational Solidarity Pact increase the employment rate of older workers in Belgium? A macro-econometric evaluation," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-23, December.
    9. repec:spr:joevec:v:28:y:2018:i:1:d:10.1007_s00191-016-0486-0 is not listed on IDEAS
    10. Andrea ALBANESE & Bart COCKX, 2015. "Permanent Wage Cost Subsidies for Older Workers. An Effective Tool for Increasing Working Time and Postponing Early Retirement?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    11. Lara Lebedinski & Vincent Vandenberghe, 2014. "Assessing education’s contribution to productivity using firm-level evidence," International Journal of Manpower, Emerald Group Publishing, vol. 35(8), pages 1116-1139, October.
    12. Pekka Ilmakunnas & Mika Maliranta, 2016. "How does the age structure of worker flows affect firm performance?," Journal of Productivity Analysis, Springer, vol. 46(1), pages 43-62, August.
    13. Mahlberg, Bernhard & Freund, Inga & Crespo Cuaresma, Jesús & Prskawetz, Alexia, 2013. "The age-productivity pattern: Do location and sector affiliation matter?," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 01/2013, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
    14. Sotiris Blanas, 2017. "Offshoring and the Age-Skill Composition of Labour Demand," Working Papers 209919378, Lancaster University Management School, Economics Department.
    15. Lovász, Anna & Rigó, Mariann, 2013. "Vintage effects, aging and productivity," Labour Economics, Elsevier, vol. 22(C), pages 47-60.
    16. Devicienti, Francesco & Grinza, Elena & Vannoni, Davide, 2015. "The Impact of Part-Time Work on Firm Total Factor Productivity: Evidence from Italy," IZA Discussion Papers 9463, Institute for the Study of Labor (IZA).
    17. Elena Grinza & Francois Rycx, 2018. "The Impact of Sickness Absenteeism on Productivity: New Evidence from Belgian Matched Panel Data," Working papers 051, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    18. repec:eee:joecag:v:1-2:y:2013:i::p:72-82 is not listed on IDEAS
    19. Baert, Stijn & Norga, Jennifer & Thuy, Yannick & Van Hecke, Marieke, 2016. "Getting grey hairs in the labour market. An alternative experiment on age discrimination," Journal of Economic Psychology, Elsevier, vol. 57(C), pages 86-101.
    20. Y. Saks, 2014. "Employees: too expensive at 50? The age component in wage-setting," Economic Review, National Bank of Belgium, issue i, pages 61-74, June.
    21. Waleerat Suphannachart, 2017. "What Drives Labour Productivity in the Ageing Agriculture of Thailand?," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(1), pages 1-6.
    22. Maciej Lis, 2017. "Productivity based selection to retirement: Evidence from EU-SILC," IBS Working Papers 02/2017, Instytut Badan Strukturalnych.
    23. Elena Grinza, 2016. "Replacing Workers: Is It a Boon or a Bane for Firm Productivity?," Working papers 034, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.

    More about this item

    Keywords

    Ageing; Old Labour Productivity and Employability; Panel Data Analysis;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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