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Aging and Productivity: Evidence from Piece Rates

Author

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  • Pekkarinen, Tuomas

    () (VATT, Helsinki)

  • Uusitalo, Roope

    () (University of Jyväskylä)

Abstract

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.

Suggested Citation

  • Pekkarinen, Tuomas & Uusitalo, Roope, 2012. "Aging and Productivity: Evidence from Piece Rates," IZA Discussion Papers 6909, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6909
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    References listed on IDEAS

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    5. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
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    8. 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.
    9. Pekkarinen, Tuomas & Riddell, Chris, 2006. "Performance Pay and Earnings: Evidence from Personnel Records," IZA Discussion Papers 2253, Institute for the Study of Labor (IZA).
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    Cited by:

    1. Lee, R., 2016. "Macroeconomics, Aging, and Growth," Handbook of the Economics of Population Aging, Elsevier.
    2. 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.

    More about this item

    Keywords

    piece rates; productivity; aging;

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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