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Aging and Productivity: Evidence from Piece Rates

  • Pekkarinen, Tuomas

    ()

    (Government Institute for Economic Research, Helsinki)

  • Uusitalo, Roope

    ()

    (HECER)

We evaluate the effects of aging on productivity using piece-rate earnings as a proxy for worker output. Our data contain the population of Finnish blue collar workers in 61 different industries during 1990-2002. A unique feature of the data is that we can observe the exact hours worked on piece rates and on fixed time rates as well as earnings under both performance schemes. We account for the selection into piece rates by using firm-level changes in pay systems as instruments for the probability of working on piece rates. A subset of workers also receive both piece rates and time rates within the same quarter. For these workers, we can directly compare the age profile of hourly earnings under piece rates and fixed rates. The results indicate that productivity increases with age until age 40 after which it stays roughly constant. Wage growth is faster than productivity growth for young workers but after age 40 both wages and productivity grow approximately at the same rate.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6909.

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Length: 22 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6909
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  1. Pekka Ilmakunnas & Mika Maliranta, 2002. "Labour characteristics and wage-productivity gaps," New Zealand Economic Papers, Taylor & Francis Journals, vol. 36(1), pages 73-74.
  2. Tuomas Pekkarinen & Chris Riddell, 2008. "Performance Pay and Earnings: Evidence from Personnel Records," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 61(3), pages 297-319, April.
  3. Judith K. Hellerstein & David Neumark & Kenneth R. Troske, 1996. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," NBER Working Papers 5626, National Bureau of Economic Research, Inc.
  4. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
  5. Olsen, Randall J, 1980. "A Least Squares Correction for Selectivity Bias," Econometrica, Econometric Society, vol. 48(7), pages 1815-20, November.
  6. David W. Galenson & Robert Jensen, 2001. "Young Geniuses and Old Masters: The Life Cycles of Great Artists from Masaccio to Jasper Johns," NBER Working Papers 8368, National Bureau of Economic Research, Inc.
  7. Flabbi, Luca & Ichino, Andrea, 1998. "Productivity, Seniority and Wages: New Evidence from Personnel Data," CEPR Discussion Papers 1966, C.E.P.R. Discussion Papers.
  8. Dostie, Benoit, 2006. "Wages, Productivity and Aging," IZA Discussion Papers 2496, Institute for the Study of Labor (IZA).
  9. Medoff, James L & Abraham, Katharine G, 1980. "Experience, Performance, and Earnings," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 703-36, December.
  10. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
  11. James Feyrer, 2007. "Demographics and Productivity," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 100-109, February.
  12. Bruno Crépon & Nicolas Deniau & Sébastien Pérez-Duarte, 2003. "Wages, Productivity and Worker Characteristics : A French Perspective," Working Papers 2003-04, Centre de Recherche en Economie et Statistique.
  13. Jianmin Tang & Carolyn MacLeod, 2006. "Labour force ageing and productivity performance in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 582-603, May.
  14. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
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