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Wages and Ageing: Is There Evidence for the "Inverse-U" Profile?

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  • Myck, Michal

    () (Centre for Economic Analysis, CenEA)

Abstract

How individual wages change with time, and how they are expected to change as individuals grow older, is one of crucial determinants of their behaviour on the labour market including their decision to retire. The profile of individual hourly wages has for a long time been assumed to follow an “inverse-U” path, although there has been little work specifically concerning the age-wage profile and documenting it convincingly. The focus of this paper is the relationship between age and wages with special attention given to individuals close to retirement. The analysis is presented in a comparative context for Britain and Germany looking at two longitudinal datasets (BHPS and GSOEP respectively) for years 1995-2004. It stresses the importance of cohort effects and selection out of employment which seem crucial in determining the downward-sloping part of the “inverse-U” profile observed in most cross-sections. There seems to be little evidence that wages fall with age.

Suggested Citation

  • Myck, Michal, 2007. "Wages and Ageing: Is There Evidence for the "Inverse-U" Profile?," IZA Discussion Papers 2983, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2983
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    Cited by:

    1. Schröder, Carsten, 2012. "The sensitivity of distributional measures to the reference period of income," Kiel Working Papers 1777, Kiel Institute for the World Economy (IfW).
    2. Kadija Charni & Stephen Bazen, 2017. "Do earnings really decline for older workers?," International Journal of Manpower, Emerald Group Publishing, vol. 38(1), pages 4-24, April.
    3. Michał Myck, 2010. "Wages and Ageing: Is There Evidence for the 'Inverse-U' Profile?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(3), pages 282-306, June.
    4. Christian Dudel, 2009. "The Demographic Dilemma: Fertility, Female Labor Force Participation and Future Growth in Germany 2007-2060," SOEPpapers on Multidisciplinary Panel Data Research 158, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. V. Vandenberghe, 2011. "Boosting the Employment Rate of Older Men and Women," De Economist, Springer, vol. 159(2), pages 159-191, June.
    6. Kadija Charni, 2016. "Is it Better to Work When We Are Older? An Empirical Comparison Between France and Great Britain," Working Papers halshs-01393268, HAL.
    7. Mikk Medijainen, 2010. "Generational Accounting As A Tool To Evaluate The Fiscal Sustainability Of Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 74, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    8. Maciej Lis, 2017. "Productivity based selection to retirement: Evidence from EU-SILC," IBS Working Papers 02/2017, Instytut Badan Strukturalnych.
    9. Bertoni, Marco & Brunello, Giorgio & Rocco, Lorenzo, 2015. "Selection and the age – productivity profile. Evidence from chess players," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 45-58.
    10. Joanna Tyrowicz & Krzysztof Makarski & Marcin Bielecki, 2016. "Reforming retirement age in DB and DC pension systems in an aging OLG economy with heterogenous agents," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-36, December.

    More about this item

    Keywords

    wage dynamics; selection; ageing;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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