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Does the Growth Process Discriminate against Older Workers?

Author

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  • Langot, François

    () (University of Le Mans)

  • Moreno-Galbis, Eva

    () (Université d'Angers)

Abstract

This paper seeks to gain insights on the relationship between growth and unemployment, when considering heterogeneous agents in terms of age. We introduce life cycle features in the endogenous job destruction framework à la Mortensen and Pissarides (1998). We show that, under the assumption of homogeneous productivity among workers, firms tend to fire older workers more often than young ones, when deciding whether to update or not a technology: there is an equilibrium where the creative destruction effect dominates over the capitalization effect for old workers, whereas the capitalization effect dominates for young workers. This discrimination against older workers can be moderated when we introduce heterogeneity (in terms of productivity) among workers. We also provide empirical support for these theoretical findings using OECD panel data and numerical simulations of the model.

Suggested Citation

  • Langot, François & Moreno-Galbis, Eva, 2008. "Does the Growth Process Discriminate against Older Workers?," IZA Discussion Papers 3841, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3841
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    Citations

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    Cited by:

    1. Pierre-Jean Messe & Eva Moreno-Galbis & François-Charles Wolf, 2014. "Retirement intentions in the presence of technological change: Theory and evidence from France," TEPP Working Paper 2014-04, TEPP.
    2. Jean-Baptiste Michau, 2013. "Creative Destruction with On-the-Job Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 691-707, October.
    3. Victoria Levin, 2015. "Promoting Active Aging in Russia," World Bank Other Operational Studies 22613, The World Bank.
    4. Anders Stenberg & Xavier Luna & Olle Westerlund, 2012. "Can adult education delay retirement from the labour market?," Journal of Population Economics, Springer;European Society for Population Economics, pages 677-696.
    5. Laetitia Challe & Florent Fremigacci & François Langot & Yannick L'Horty & Loïc Du Parquet & Pascale Petit, 2015. "Access To Employment With Age And Gender: Results Of A Controlled Experiment," Working Papers hal-01292137, HAL.
    6. Moreno-Galbis, Eva, 2010. "On the impact of the TFP growth on the employment rate: does training on-the-job matter?," CEPREMAP Working Papers (Docweb) 1022, CEPREMAP.
    7. Fouad Khaskhoussi, 2009. "Job-Search Effort, Retirement Decision and Pension Reform: A Wage Bargaining Investigation," Economics Bulletin, AccessEcon, vol. 29(2), pages 1255-1263.
    8. Zanin, Luca, 2014. "On Okun’s law in OECD countries: An analysis by age cohorts," Economics Letters, Elsevier, vol. 125(2), pages 243-248.
    9. Moreno-Galbis, Eva, 2012. "The impact of TFP growth on the unemployment rate: Does on-the-job training matter?," European Economic Review, Elsevier, vol. 56(8), pages 1692-1713.
    10. Maurizio Bussolo & Johannes Koettl & Emily Sinnott, 2015. "Golden Aging," World Bank Publications, The World Bank, number 22018.
    11. Cheron, Arnaud & Khaskhoussi, Fouad & Khaskhoussi, Tarek & Langot, François, 2004. "Voluntary and involuntary retirement decision : does real wage rigidity affects the effectiveness of pension reforms ?," MPRA Paper 9119, University Library of Munich, Germany.
    12. Ochsen, Carsten, 2015. "The Ins and Outs of German Unemployment," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113223, Verein für Socialpolitik / German Economic Association.
    13. Karsten Wasiluk, 2014. "Technology Adoption and Demographic Change," Working Paper Series of the Department of Economics, University of Konstanz 2014-05, Department of Economics, University of Konstanz.

    More about this item

    Keywords

    old workers' employment rate; unemployment by age; TFP growth; capitalization; creative destruction effect;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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