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Firm and Worker Dynamics in an Aging Labor Market

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  • Niklas Engbom

Abstract

I develop an idea flows theory of firm and worker dynamics in order to assess the consequences of population aging. Older people are less likely to attempt entrepreneurship and switch employers because they have found better jobs. Consequently, aging reduces entry and worker mobility through a composition effect. In equilibrium, the lower entry rate implies fewer new, better job opportunities for workers, while the better matched labor market dissuades job creation and entry. Aging accounts for a large share of substantial declines in firm and worker dynamics since the 1980s, primarily due to equilibrium forces. Cross-state evidence supports these predictions.

Suggested Citation

  • Niklas Engbom, 2019. "Firm and Worker Dynamics in an Aging Labor Market," Working Papers 756, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmwp:756
    DOI: 10.21034/wp.756
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Firm and Worker Dynamics in an Aging Labor Market
      by Christian Zimmermann in NEP-DGE blog on 2019-05-10 19:30:02

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    Cited by:

    1. Francesco D'Amuri & Marta De Philippis & Elisa Guglielminetti & Salvatore Lo Bello, 2021. "Natural unemployment and activity rates: flow-based determinants and implications for price dynamics," Questioni di Economia e Finanza (Occasional Papers) 599, Bank of Italy, Economic Research and International Relations Area.
    2. Gerald Carlino & Thorsten Drautzburg, 2020. "The role of startups for local labor markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(6), pages 751-775, September.
    3. Serdar Birinci & Kurt See & Shu Lin Wee, 2020. "Job Applications and Labor Market Flows," Working Papers 2020-023, Federal Reserve Bank of St. Louis, revised Feb 2022.
    4. Guimarães, Luis & Gil, Pedro, 2019. "Looking ahead at the effects of automation in an economy with matching frictions," MPRA Paper 96238, University Library of Munich, Germany.
    5. Tomoaki Kotera, 2020. "Sustainability of Social Security in the Aging Economy from the Perspective of Improving Health," IMES Discussion Paper Series 20-E-12, Institute for Monetary and Economic Studies, Bank of Japan.

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    More about this item

    Keywords

    Demographics; Employment; Economic growth; Labor turnover; Entrepreneurial choice;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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